SR-8-B (21)
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sep 2 7 1983
CA : RM~1 : r
Clty Council Meetlng 9-27-83
Santa Monlca, Cal1fornla
STAFF REPORT
TO:
Hayor and Clty Councll
FROB:
Clty Attorney
SUBJ:f.CT:
BUSlness Llcense ~ax Ordinance
In connectlon with the adoptlon of the 1083-84 Budget, the
City Counel1 directed the Clty Attorney to prepare an ordinance
makino various chanqes in the business llcense tax structure of
the City of Santa 1\10nlca.
In response to this dlrectlon. the
acconpanYlng ordinance has been prepared and lS presented for
Clty Council conSlderatlon.
GENERAL OVERVIEW
,,"1 th the adoption of the 1983-84 Pudget, the Cl ty Council
endorsed business l1cense tax changes designed to lncrease
current flsca1 year revenues by $1.3 nilllon.
The City Councll
has previously rece1ved a variety of reports sumrrarizing the
proposed buslness llcense tax changes.
The followlng SUDmarlzes
the proposed changes:
1. Tax rates wl11 chanqe. not categor1es for licenslna.
(The only exceptlon discussed below 1S to cpange the category of
regulated utllitles to respond to a constl t utiona 1 obJ ection
ralsed by one utlllty.
See dlSCUSSlon in connection wlth Section
62 2 SA. )
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SEP 2 7 1983
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2. The tax changes wlll not De fully effective untll
1<:\84-85. Por flscal year 1983-84, taxes w~ll increase or
decrease ry one-half the change required by the new rates, to be
collected in speclal hilllng in early 1984.
3.
Indivldual
firms
may realize tax decreases, tax
increases, or no change in tax payments.
More than half of the
approx lMate ly 15,600 licensees in the City of Santa Monica will
not be affecten by the tax changes, Slnce they are in categories
not covered by the proposed ordlnance.
4. Tax rates are lower than or equal to the comparison
Jurlsdlctions of the cities of Beverly Hills, Culver Clty, and
Los Angeles.
5. The tax rate changes wlll not result in lncreased
assessrrtents under Ordinance Number 70/ (CCS) for businesses
located in the Downtown parklng and Bus~ness I~proveMent Area or
Ordlnance NUMber 960 (CCS) for businesses located in tre Montana
Avenue business pronation area.
TAY RATF CHAPGES
The proposed
determined on the
ordlnance changes the tax
baS1S of gross receipts,
rate, generally
for SlX general
categories of l~censees:
1. Professlons, Occupations, and SerVlces.
Currently,
the bUSlness license tax palO by professions,
occupations, and serVlces is:
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t-llnirouIl'
Tax Rate
t-1ax ip1Um
S20
5.65 per ~1,OOO > $6,000
52,000
The reviseo tax rate contained In the ordinance is:
~1inirrLun
Tax Rate
HaXlmUl'1.
$20
$3 per S1,OOO
None
ApprOXlnately 3,399 bUSlnesses \vill he affecteCl by the
proposed amendment.
The Hunlclpal Code provisions amended to
effectuate this change are Sections 6236, 6240, and 6240A.
2. Reta~l Sales.
Currently,
the business llcense tax paid by retall sellers
is:
r-1~nlP1UI'1
Tax Rate
HaXlmum
$25
~.60 per $1,000 > 510,000
52,000
The revlsed tax rate contalned in the ordlnance is:
Hln11'1.UITl
Tax Rate
r--laximuITl
S25
$1.25 per $1,000 > S500,000
None
Approximately 2,120 businesses w1ll be affected by the
proposed amendment.
The Hun1cipal Code provislon amended to
effectuate this change lS Section 6225.
3. Manufacturers and Wholesalers.
Currently,
the bus1ness llcense tax paid by manufacturers
and wholesalers 1S:
NiniITlum
Tax Rate
r1axinum
S25
$.50 per SI,OOO > $10,000
S5,000
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The rev1sed tax rate contained in tre ordinance is:
M1nUTlUm
...,ax Rate
MaX1mum
~25
~l.on per ~l,OOO > S500,OOO
None
ApproX1mately A61 bUS1nesses will be affected by the
proposed amendment.
The Munic1pal Code prov1s ion amenrl ed to
effectuate this change is Sect10n 62/6.
4. Automotive Dealers.
Currently,
the bUSlness license tax pa1d by automotive
dealers is:
r--1in1murn
Tax Rate
MaX1mUQ
$100
$.50 per $10,000 > SlOO,OOO
$1,000
The rev1sed tax rate contalned 1n the ord1nance is:
H.1.n1rnUID
Tax Rate
Max:trnun
S100
$1.25 per Sl, 000
$2,500
(The maXlmul'l tax would be increased to $5,000 in f1scal year
1985-86 and each year thereafter.)
Approximately 46 bUS1nesses will re affected by the
proposed amendi1lent.
The z.tuniclpal Code provis 1 on amended to
effectuate this change is Sect10n 6209.
5. Conmerc1al Rentals.
Currently, the bUS1ness license tax paid by comnerclal
rental llcensees 18 :
r'hnirmM Tax Rate Max1mum
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SIn $.75 per Sl,noo > SlO,OOO None
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The rev~sed tax rate contained ~n the ordinance is:
~1ininurn
Tax Rate
Haximum
$2t)
Sl.25 per <;1,000
\Tone
Approx~mately 740 businesses w~ll be affected by the
proposed amendment.
The Munic~pal Code provis~on aPlended to
effectuate th~s change is Sect~on 6219A.
n. Sav~ngs and Loans.
Currently,
the bus~ness l~cense tax paid by savings and
loans lS:
Mininur.l
Tax Rate
Hax~mum
SlOO
$100
SlOO
The rev~sed tax rate contained ~n the ordinance is:
M~nimum
Tax Rate
Max~Plum
SlOO
S3 per SI,OOO
None
Approx~mately 29 rusinesses will be affected 'by the
proposed aPlendment.
The Municipal Code provislon amended to
effectuate th~s chanqe is Section 6223.
SECTION BY SECTION A}TALYSIS
The following is a sect~on by sectlon analysis of the
proposed arnendl'lents, delet~ons, and add~ tions conta~ ned ln the
accompanying ordinance:
Sectlon 6106.
Sectlon 6106 has been amended to substitute
the Dlrector of Finance for the ci ty Clerk.
In addition, a
provlsion has been added substltuting the Director of Finance for
the c~ ty Clerk throughout Artlcle VI of the r'luniclpal Code.
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Section 6107.
Sectlon 6107 has been amended to substltute
the Director of Flnance for the City Clerk.
Sectlon 6116.
Bectlon 6116 has been anencted to substltute
the Dlrector of Finance for the Clty Clerk~ to require t"Pat
wri tten statements of licensees be in a prescrlbed format wlth
speclflc documentation~ and to tax businesses with Multiple
locatlons in the City on the basis of total gross receipts at all
locations rather than taxlng each location separately.
Sectlon 6116B. Section 611~B has been added to provide a
ceflnl tlon of gross receipts. In aCldi tion, the new section
empowers the Dlrector of Flnance to adopt, with the approval of
the Clty Attorney, rules and reqUlatlons relatlng to
apportionnent. Is sues of apportionment arlse when certaln
businesses have gross receipts frOM activitles generated from
both wlthln and wlthout the Clty.
Section 6127. The purpose of this Sectlon is to describe
the operation of the tax rate changes lMplemented by the
accompanying ordinance.
As the Section lndlcates, buslnesses sub] ect to the
changes wlll receive ln Janauary 1984 a special statement
providing them with the amount of addltlonal taxes owed or the
aI'lount of the refund res u 1 tlng frolTl the changes made by the
acconpanying ordlnance.
The additlonal taxes or refunds will be
calculated by totaling taxes under tne old tax structure with
taxes under the new tax structure, wlth the total dlvided by two.
ThlS wlll result ln an effective 19R3-84 business license tax
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which ~s higher or lower than the old tax by an a~ount equal to
one-half of the amount of the chanqes inplemented In the
accornpany~ng ordinance. (For example, if the tax under the old
law was SSO.OO and the tax under the new law was SIOO.OO, the tax
for the current year would be ~75.00.)
In addl tion, th~s Sec tlon ~s designed to ensure that
businesses 1n the Downtown Parking and Bus~ness Improvement Area
do not pay an increased special business license tax pursuant to
Ordlnance number 702 (CCS) in addltion to any increased business
license tax. Under Ordinance 702 (CCS), a special business
license tax is assessed in the Downtown Park~ng and Bus iness
Improvement Area. The spec~al bUslness llcense tax is calculated
at f1ve t~nes the regular bUSlness llcense tax.
Section 6127 provldes that the business llcense tax, for
purposes of deterMlninq the speclal hUSlness license tax required
by Ordlnance 702 (CCS), is the business llcense tax deterMined by
the law 1n effect on July 1, 1983. Accordingly, the anount of
the special buslness license tax wlll not increase or decrease
w1th the changes 1n the tax rate contalned in the accompanying
ordinance. In the future, lt nay be oeslrable to anend Ordlnance
702 (CCS) to change the speclal bUSlness license tax rate set
forth in that ord inance .
However, since a resol utlon of
J..ntentlon is required before Ordinance ~umber 702 (CCS) can be
anended, Section 6127 provides an lnterim solution to lmplenent
the City COUDCll's obJective of not provlding an increased
spec1al business license tax in the Downtown parking and Business
Improvenent Area.
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The City has also established by ordlnance business
promotlon areas.
See
Ord1nance HUMber 725 (CCS) (Downtown);
Ordlnance Number 960 (CCS) (pontana Avenue).
The Downtown business proMotion area determines the amount
of the speclal asseSSMent on the basls of a percentage of taxable
sales; accordingly, the changes In the aMount of tl1e business
license tax will not change asseSSMents for thlS promotion area.
The Montana Avenue business promotion area determlnes the
amount of the specinl assessment on the baS1S of 259.; of t"he
business license tax with a ~inl~un of S2~ and a naxinu~ of ~200.
Because the amount of the special assessment is t1ed to the
business license tax, Sectlon 61:'7 provldes that the business
license tax, for purpose of determinlng the special business
license tax required by Ord1nance Number 960 (CCS), is the
bus1ness llcense tax determined by the law In effect on July 1,
198 3 .
Accordingly, the amount of the speclal bus lness license
tax for the Montana Avenue bus1ness promotlon area will not
lncrease or decrease wlth the changes ln the tax rate conta1ned
in the acconpanYlng ordlnance.
f:ection 6209.
Sectlon 6209 has been a~ended to chanqe the
tax rate for auto and trailer sales bUSlnesses frow ~lOO mininum
plus $.50 per each $10,000 of gross receipts in excess of
SlOO,000 up to a maximum tax of $l,noo to SlOO nlnlmuro or ~1.25
per each $l,onn of gross rece1pts, wh1chever 1S greater, up to a
maX1murn of $2,500 untll lqR4-85 and c;S,OQO 1n 19P5-86 and
thereafter.
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Section 6219A.
Section 6219A has been amendec. to change
the tax rate for co~erclal rental businesses fron 510.00 ~iniMun
plus $.7~ per each 81,000 of gross recelpts in excess of 510,000
to $25 mlninu~ or $1.25 per $1,000 of gross receipts, whlchever
is greater.
Sectlon 6223. Section 6223 has been a~ended to change the
tax rate for loans, building and loans and savings and loans
buslnesses fron the flat rate of $100 to $100 or $3 per $1000 of
gross recelpts, whichever is greater.
In addition, the Section
defines the gross recelpts included for thlS category of
11censee.
Section 6225. Bectlon 6225 has been amended to change the
tax rate on retall sellers fron S.hO per $1,000 of gross receipts
in excess of SlO,OOO up to a naxinun tax of S2,OOO to $25.00 plus
Sl.2~ per 51,000 of gross receipts In excess of 8500,000 witD no
maxlmun tax.
Section 6225A. At tre present time,
receipts of uti 11 ties have been taxed at the
certain gross
professional,
occupatlonal, and service
ra te .
In response
to the proposed
will result ln
changes ln the tax ra te
structure, which
profesSlonal, occupatlonal and serVlce licensees paYlng More than
retall and rranufacturlns llcensees,
contacted the Clty and indicater'i
appropriate.
Article XIII, Sectlon 19 of the Constitutlon of the State
of Callfornla provldes that the City nay not tax utllltles In an
General Telephone Company
tr.a t a ca tegory chang e was
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amount "which dlffers from that imposed on mercantlle,
manufacturing, and ot_her bUSlness corporatlons. II Glven thlS
constl tut lonal prov lS ion, the City Attorney reconnends that
utlllties sub] ect to thlS constitutional provislon be taxed at
the rate generally applicable to retall sellers. By belng placed
ln this category, which was reconnended by General Telep}-lone
Company, utllitles wlll be taxed In conformity with the taxes
assessen on the overwhelmlng nunber of businesses falling within
the deflnl tion of mercantlle, nanufacturlng, and otl1er business
corporat1.ons.
See
Clty of L1.vermore v. Pacific Gas & ~lectrlc
Co., 120 Cal. App. 3d 1001, 175 Cal. Rptr. 100 (1981).
Sectlon n226. Section 622h has heen amended to change the
tax rate on nanufacturers-wholesalers from $. 50 per S 1,000 of
gross receipts in excess of $20,000 up to a Maximum tax of S5,ana
to $25.00 plus $!.C10 per s1,OOO of gross receipts in excess of
8500,000 W1.th no naXlmun tax.
Sectlon 6236. Section 623n has been anended to change the
tax rate on profes s lona Is froPl $ 20.00 roinlnurn pI us $. (; 5 per
$1,000 of gross recelpts in excess of Sh,OOO up to a maX1JTlUm tax
of $2,000 to $20.00 Mlnl~UI'1 or $3 per Sl,OOO of gross receipts,
whichever is greater, with no maximum tax.
The new section also
substitutes the Dlrector of Flnance for the Clty Clerk.
Section 6240. Section ~240 has been anended to change the
tax rate on serVlces buslnesses from S20 punimum plus $ .65 per
Sl,OOO of gross receipts in excess of $6,C100 to 520 ninimuJTl or 81
per $1,000 of gross recelpts, whlchever is greater.
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Section 6240A.
Bectlon 6240A has been repealed to
elimlnate the naxinum tax limlt of S2,ono on services businesses.
Other technlcal changes have
been made in nany of the
technical chanqes include
sections discussed above.
These
addition of ne\v subdlvisions, renumbering of subdivisions,
elimlnatlon of sexlst language, and conformlty of provlsions to
~ore recent anendMents of the Municipal Code.
RFCOMMP"DATION
It is respectfully recommended tDat the accompanYlng
ordlnance be introducted for first readlng.
PREPARED BY:
Robert M. Myers, Clty Attorney
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CA:RMM:rm6100
C~ty Council Meet~ng 9-27-83
Santa ~1onica, Callforn~a
ORQINANCE tWMBER
(Clty Counc~l series)
A~ ORDINAPCE OF THE CITY COUNCIL
OF THE CITY OF SANTA MONICA
TO AMEND SECTIONS 6106, 6107, 6116, 62091
62l9A1 62211 h2251 62261 67361 AND 6240
OF TPE SAt.JTA MONICA N~JICIPAL CODE,
TO REPEAL SECTION ~/4DA OF THE
SA tIT A MONICA MLmICIPAL CODE,
AND TO ADD SECTIONS
61l6B, 6127, AND 6225A
TO THE SA~~A MONICA MUNICIPAL COD~
RELATING TO THF BUSINESS LICENSE TAX
THE CITY COUNCIL OF THE CITY OF SAN""A HmnCA DOES ORDAn.- AS
FOLLOWS:
SECTIOK 1. f'ectlon 6106 of the Santa Ponlca t1un~c1.pal Code
is amended to read as follows:
SECTION 6106.
Director of Finance to
Issue.
(a) The Licenses requ~red by th~s Code
shall be issued by the D1.rector 0 f Finance
and shall state therein the amount thereof 1
the perioo of time covered therebYI the name
of the person to whorl issuedl the bus lne s s
licensed and the location or place of
bUs1ness where such business 1S to be carrien
on.
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(b) No l~cense granted or ~ssued under
prov~sions of the Code shall be in any manner
transferred or assigned.
(c) The Director of Finance shall make
a charge of S. 50 for each dupllca te l~cense
~ssued under the prov~s~ons of thlS Code
wh~ch has been lost or destroyed.
(d) In no case shall any ~lstake made
ry the Dlrector of Flnance in stating t~he
a~ount of a license prevent or prejudlce the
collection by the Clty of the amount actually
due fron any llcensee.
(e) ~Vhenever ln this Article the Clty
Clerk is charged \tlith the responsibility of
process~ng, lssulng, or admlnister~ng a
llcense or permlt, the reference to the City
Clerk shall be (leened a reference to the
Plrector of F1nance.
Sr:CTIOP '1 Bectlon 6107 of the Santa Honica Hunlcipal Code
is amended to read as follows:
SECTION ~l07. Tern of License.
{a} All license fees shall be paid in
advance in leaal money of the United 8tate5,
at the offlce of the D1rector of F1nance. A
separate license nust be obtained for each
branch es tab lishI'lent or sepa ra te place of
buslness, ln WhlCh bus1ness 15 carr 1e d on,
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and each license shall authorize the party
obtaining it to operate only that bus ines s
descr1bed in such llcense, an only at the
locatlon or place of bUSlness which is
1ndlcated thereby.
(b) Every weekly license shall expire
at midnight on the Sunday next succeed1ng its
day of issuance.
(c) pvery nonthly 11cense shall exp1re
at m1dnight of the last day of the month
dur1ng which J..t was lssued.
(d) Every annual license shall expire
at ~ldn1ght on the June 30th next succeeding
its issuance unless specif1ed otherwise in
this Code.
(e) In the event a bond 1S required no
license shall be issued unt1l said bond has
been filed with the D1rector of Finance.
(f) No greater or lesser amount of
money shall be charged or received for any
license than 15 provlded In th15 Code, and no
license shall be sold or issued for anv
period of tlJ'1e other than 1S prov1ded in this
Code.
SEC'1'IOl~ 3. Sectlon 6116 of the Santa fI~onlca r.1unlclpal Code
15 anended to read as follows:
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SECTION (';116.
Statement of Licensee.
(a) In all cases where the amount of
l~cense to be paul by any person is based
upon the amount of recelpts, or sales or of
buslness transacted, or upon the number of
persons emp1oyeo or upon the number of wagons
or other vehic les, used, or upon the amount
of the roax~num admlsslon fee charqed, or upon
the nunber of tables or chairs used for any
gane or upon the nunber of un~ts in any
bU11dlno. or upon the seating capacity, such
person, before obta~nlng a license for such
bUs1ness and w1th1n th1rty (30) days after
the beginn1ng of each license period, shall
file w1th the [1irector of Finance a ....rritten
statement 1n the form requ1red by the
D1rector of F1nance, supported hy such
documentation requested by the Director of
F1nance, showing the total amount of receipts
or sales or of business transacted durina the
precedlng llcense year, or the nUMber of
wagons, or other vehicles used or the anount
of the maX1mum admission fee charged, or the
number of units conta1ned 1n such bU1ld1ng,
or the seat1ng capaci ty at the date of such
statement.
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(0) If two or More closely relate~
businesses are carried en at the same
location and under the sane ownership and the
buslnesses are on a gross recelpts basls, the
gross recelpts shall be reported together and
the greater of the rates app llcable wlll be
used for the compilatlon of the annual
license fee. When two or more non-related
businesses are operated at one location,
separate llcenses shall be requlred.
(c) If any person is requlred to have
two or more 11censes subJect to a llcense fee
under Sectlon 6225, 6225A, or 6226 of this
Code, the person sr.all pay, 1n add 1 t10n to
the mininun annual llcense fee for each
IJ..cense, a slngle 11cense fee for all
llcenses computer} on the basis of the total
gross receJ..pts of all llcenses.
(d) Ko statenent filed pursuant to
th1S Sect10n shall be conclusive upon the
C1 ty or upon any offlcer thereof as to the
~atters therein set forth, and the sane shall
not preJudice the rlght of the Clty to
recover any amount that may be ascertained to
be due fron such person 1n addltlon to the
anount shown by such statement should It be
found to be 1ncorrect.
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(e) If any person required to flle any
statenent pursuant to this Sectlon shall fail
to do so, such person shall be required to
pay a license fee at the maX1WUM rate hereln
prescribed for the business carried on by
such person and shall be gUllty of a
vlolatlon of thls Code and shall be
punlshable therefor as hereinafter provided.
(f) In any case where tDe first
llcense is to be issuer for a newly
establ ished bus lnes s. the minimun tax for
that type of bUSlness shall be paid, and at
the terminatlon of the license perlod durlng
WhlCh the operation of such business is
commenced, the license for such license
period
shall be adJusted
prov lded by th i s
and paid ln
Section for
the
the
manner
ascertalnlng and paYlng of licenses for other
license perlods, after deductlng froll' the
amount so found to be due the anount paid at
the tlMe such first license was issued.
(0) The correctness of any stateMent
filed pursuant to thlS Sectlon shall he
subJect to audlt and verification by the
Cirector of Finance. WDO is hereby authorlzed
and eMpowered to lnspect and audit the books
ami records of any and all persons llcensed
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to carryon any business specified in thl.s
Code.
(h) Any statement flIed pursuant to
this Section shall ce signed and shall
contaln the following:
"I declare, under penalty of naking a
false declaratl.on, that I aro authori zed to
nake thl.s stateI'lent and to the best of my
knowledge and belief it lS a true, correct
and cOI'lplete statement, made ln good faith
for the perl.od stated."
For making a false statement or
declaration the person signlng the statement
shall be gUl.lty of a misdemeanor.
(1) Any statement filed pursuant to
thl.S Section shall be confi0ential in
character and shall not be subJect to puhlic
lnspectl.on. It shall be the duty of the
Dlrector of Finance to preserve and keep the
statements so that the contents thereof may
not become known except to the persons
charged by law Wl. th the adll' lnistra tion of
this Code.
SECTIO~ 4. Sectlon 6/0Q of the Santa Monica Munlclpal Code
1S aI'lended to read as follows:
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SECTION 6209.
Auto and Trailer Sales.
Buying, selling or offerlng for sale new or
us ed aut0J110bll es, trucks, trai ler s, house
trallers, or campers, lncl uding parts and
repairs, the annual llcense fee shall be
$100.00 or $1.25 per each $1,000 or fractlon
thereof of gross receipts, whlchever is
greater. In no event shall any license fee
requlred to be pald pursuant to thlS Sectlon
be in excess of S2,50(l for llcense year
1983-84, S2,SOO for llcense year lQS4-R5, and
$5,000 for llcense year 1q85-86 and each
llcense year thereafter.
SECTION 5. Section 621 q1l.. 0 f the Santa Moni ca t'''unic ipal
Code is anended to read as follows:
SECTION 6219A.
COffiPlerclal Rental. Any
person, group, assoclation, partnership, firm
or corporatlon, whether as the owner or as
the agent for the owner, who rents, leases or
has avallab1e for rent or lease, one or Plore
comMercial bu i ld lng, lnd ustr lal bUl1ding,
offices or offlce bUlldlng, land or vacant
lots that way be utllJ_zed for commerlcal,
industrlal or offlce uses, whether at one or
r:1Ultiple locatlons, the annual license fee
shall be $25.00 or 81.25 per each $1,000 or
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fraction thereof of gross receipts, wh1chever
1S greater.
SECTION 6.
Sect10n 0223 of the Santa Monica Municipal Code
1S a~ended to read as follows:
SECTION f223. Loans, Building & Loans,
Sav1ngs & Loans. Loan1ng money upon personal
security, evidences of debt, asslqnment of
salary, salary warranty, salary demands,
aut0I'10b1les, or any personal property, or
purchasing automoblle contracts, commercial
paper, eVloences of debt, ass1gnments of
salary, salary warranty, salary deI'1ands, tlme
checks, or other evidences of salary due or
to beCOMe due, or autonobile paper, the
annual license fee shall be SlOQ.OC or S3.no
per each Sl,OOO or fraction thereof of gross
receipts, wh1chever is greater. Gross
rece1pts shall 1nclude the following:
1. Interest on real estate loans.
2. Loan fees of varlOUS k1nds, such as
fee for escrow, appra1sal drawing papers, and
other similar charges.
3. Bonuses received for prepayr'ent of
loans.
4. Penalty charges on delinquent loans.
5. Tax service fees.
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6. Interest on personal loans to
depos~tors.
7. Receipts over and above the recovery
of princ~pal frat': the sale of nortgages or
other evidence of ~oney due from loans.
Nothing in this Sect~on conta~ned shall
be deened or construed to apply to the holder
of a bond broker's l~cense, or to any person
conduct~ng a banking business under the laws
of the State of Cal~forn~a, or a pawnbroker's
bus~ness .
SECTION 7. Section F.72 5 of the Santa Hon~ca r1un1c1pal Code
1S aMended to read as follows:
srCTIOl'T 6275.
r1erchants-Peta1l.
Manufactur1ng and sell~ng any qoods, wares or
nerchand~se at reta~l or
wares
or merchandi s e
sell~ng any goods,
at retail and not
otherwise speclfically l~censed by other
provisions of this Code, or not specifically
exempted ~ron the paynent of llcenses by this
Code, the annual license fee shall be S25.00
min~mum, plus $1.25 per each $1,000 or
fract10n thereof of gross rece~pts ~n excess
of S500,000.
SECTION 8.
Section (,226 of the Santa l-1onica r1unic~pal Code
is aMended to read as follows:
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SECTION 6226. Manufacturers-
vlholesalers.
Manufacturing and selllng any
goods, wares, or merchandlse at wholesale or
selllng goods, wares, or Plerchandise at
wholesale and not otperwlse speciflcally
licensed by other provislons of this Code, or
not speeiflcally exenpted from the pa1ment of
licenses by thlS Code, the annual llcense fee
shall be S2S.00 minlMur, plus Sl.00 per eaeh
Sl,QOn or fraction thereof of gross recelpts
ln excess of $500,000.
SECTIO!';,r 9.
Seetlon 623f, of the Santa Honica Mun~c~pal Code
~s aPlended to read as follows:
S E C T I 0 ~T 6 2 3 6 .
ProfeSSlonal.
Any
person, group, associatlon, partnershlp, firm
or corporatlon engaged ln a profession,
vocatlon or calling, listed herelnafter or
not speclflcally provloed for in any other
Sectlon of thlS Code, the annual license fee
shall be $20.00 or $3.00 per each $1,000 or
fract~on thereof of gross recelpts, whicpever
is greater.
The professlons, vocations or callings
referred to hereln lncl ude, but are not
llmited to the followlng:
1. Accountant.
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2. Appra~ser.
3. Archltect.
4. Assayer.
5. Attorney-at-law.
6. Auditor.
7. Bacterlologist.
R. Bond Broker.
9. Cert~fied Public Acountant.
10. Cherist.
11. Chiropodlst.
12. Chiropractor.
13. CiVll Fnqineer.
14. COmMerclal Art~st.
15. COP1rlissJ.on r'erchant.
Ih. Credlt Report.
17. Decorator (Interlor).
18. Dental Techn~cian.
19. Dentlst.
:'0. Deslgner.
21. Doctor-~edlcal.
22. Draftsman.
23. Drugless Practltloner.
24. Electrlcal Engineer.
25. Electrologlst.
26. Geologist.
27. Hypnotlst or Hypnotheraplst.
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28. Insurance AdJuster.
29. Insurance Broker.
30. Landscape Architect.
31. t1anufacturer I s Agent.
32. nechanical Englneer.
33. Mlnlng ~nglneer.
34. Oculist.
35. Optician.
36. Optometrlst.
37. Osteopath.
38. Physlcian.
39. psychlatrist.
40. Publlclty Agent.
41. Real Estate Broker.
42. Stock Broker.
43. Surgeon.
44. Surveyor.
45. Tax Counselor.
46. veterinary.
vllienever a State of Callfornla llcense
18 requlred to entitle a person to practlce a
profession, the D1rector of Flnance may
require, before 1ssuing a license pursuant to
th1S Sectlon,
unexp1red and
sald applicant
Callforn1a.
the applicant to exhibit an
unrevoked llcense entitling
to pract1ce In the State of
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SEC'"rrON 10.
Sect1.on 6/40 of the Santa Monica Municlpal
Code 1.S aMended to rean as follows:
SECTIOP 6240.
ServJ.ces.
Selling or
provioJ.ng for pay any serVJ.ce which is not
otherwise specifically licensed by other
provJ.sions of thJ.s Coce, or not speciflcally
exenpted from the payment of IJ.censes by this
Code, the annual license fee shall be S20.00
or $3.00 per each $1,000 or fraction thereof
of gross rece1pts, whichever 15 greater.
The services referred to here~n
1.nc1ude, but are not 1iMlted to, the
fo11owlng:
1. AdvertisJ.ng,
Re1atlons Agency.
Pub11Clty or PubllC
2. Alarm.
3. Jl.nlna1 Care or Leasing.
4. Auto Servlce Statlon.
5. Auto Wash.
6. Auto Hrecking. A perrn1t lS
requ1red prior to licenslng (see Sections
6120 and 6122).
7. Barber Shop, Beauty Parlor, or any
other es tah1ishment engaged 1n ton s or ia I
arts, manicuring, shanpooing, hair-dressing,
shavlng or facla1 nassage.
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8. Bath Rouse or Bath Treatment. A
perrr~t is required prlor to llcens lng (s ee
Sections 6120 and 6122).
9. Bookkeep1ng.
10. Booking or ~eatrical Agent.
11. Brokerage, Stocks and Banas.
12. Caterer.
13. Check Cashing.
14. Collectlon ^gency.
15. Commercial Artlst.
16. Consultant.
17. Data processing.
18. Employment Pureaus.
19. Gardenlng and Landscaping.
20.
House,
COMmercial
BUllding,
Industrial Plant, etc., cleanlng, inc 1 udlng
Janitor~al, household furnlshlngs and
wlndow-washing serVlces.
21. Illustrator.
22.
Inst~ tutions,
schools, or persons
engaged in the bUS1ness of providing for pay
lnstruction 1n such Matters as art, aviation,
beauty culture, sel f-defense, trade or
business or other aCCOl'1pllShment.
A pernl t
1S required for dance and phys ical culture
instruct10n prior to licensing (see Sections
6120 and 6127).
Th1S sub-Section shall not
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apply to any gymnasiurr conducted in
connection with any prl vate cl ub or any
public or private school w~ere other courses
of lnstructlon are qlven.
23.
Agency.
24.
25.
Let ter
Hritlng
or
Addresslng
Lithographer.
requlred prior
to
or Masseuse. A pernlt is
licenSlna (see Sectlons
Hasseur
f;120 and 6122).
26. t-1orticlan.
27. Odor Control.
2A. Private Investigation,
Patrol or
Securlty Agency.
29. Public stenographlc Service.
30. Rental of Vehlcles, Trailers,
Appliances, etc.
31. Repair
In conJunctlon
l~censed.
32. Research Flrn.
service of any type when not
wlth a business already
33. Storage or Warehouse Facilitles.
34. Tallors or Dressmakers.
35. Telephone Answering SerVlce.
36. Tlcket Agency.
37. .....ree Care.
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38. Typewr~ter Repair.
SECTION 11.
Code 1S repealed.
SECTION 12.
Sect10n 6240A of the Santa Monica Municipal
Sect~on 61ltSB ~s added to the Santa Monica
Munic~pal Code to read as follows:
SECTION 6116B. Gross Receipts.
(a) "Gross rece1pts," whenever used 1n
thls Artlcle shall be construed as def~ned in
this Sectlon unless from the context a
different mean1nq is intended or unless a
different meaning is spec~fically defined.
"Gross receipts" shall mean the gross
rece1pts for the fiscal year cOmlTlenc1ng on
July I and end1ng on June 30 of the follow~ng
year and shall mean:
(1) The total amount of the sale
price of all sales, the total amount charged
or received for the perforI'lance of any act,
serV1ce or employment of whatever nature it
~ay be, whether such service, act or
enployment is done as part of or ln
connectlon with the sale of goods, wares,
Plerchandlse or not, for which a cha rg e 18
nade or credlt allowed, lnclud~ng all
receipts I cash I credlts and property of any
klnd or nature I any aP10unt for WhlCh credit
is allowed by the seller to the purchaser
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wlthout any deductlon therefron on account of
the cost of the property sold, the cost of
the rnaterlals used, labor or service costs,
lnterest pald or payable, losses or any other
expense whatsoever~ provided that cash
discounts allowed or taken on sales shall not
be included.
(2) "Gross recelpts II shall also
include the amount of any federal
nanufacturers' or lmporters' eXClse tax
lhcluded ln the prlce of property sold, even
though the nanufacturer or lmporter is also
the reta1ler thereof and whether or not the
amount of such tax is stated as a separate
charg e .
(3 )
"Gross receipts II
shall not
1nclude the amount of any federal tax lmposed
on or with respect to retall sales whether
lmposed upon the retaller or upon the
consumer and regardless of whether or not the
anount of federal tax lS stated to custoners
as a separate charge, or any Callforn~a
state, clty, or city and county sales or use
tax required by law to be lncluded in or
added to the purchase price and collected
fro~ the consumer or purchaser, or such part
of the sales prlce of any property previously
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sold and returned by the purchas er to the
seller WhlCh is refunded by the seller by way
of cash or credit allowances glven or taken
as part payment on any property so accepted
for resale.
(4) In connection with a person
leaslng or rentlng property, "gross receipts"
shall lnclude all amounts paid by a tenant to
a lessor for the services perforned, or
materials used, or utilitles or facillties
furnished by U1e lessor on the premises or ln
connectlon wlth the tenant's use, possession,
or the rlght to possess the property. "Gross
recelpts" shall also include any receipts
paid by a tenant to ales sor for the use or
possess1on of land, or the right to use or
possess land other than that upon which the
bUlldlna or structure is located but Wh1Ch is
used or possessed or ~s aval1able for use or
possesslon by a tenant for purposes related
to the tenancy. "Gross receipts" shall also
include all aMounts paid as prepald rent.
(5 )
"G ro s s
receipts"
shall
incl ude receipts of any person rec e 1. vec1 as
cO~lssions or fees earned, or charges of any
character made or cOPlpensatlon of any
character recelved, for the performance of
19
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any service by said person or any of said
person's employees. "Gross recelpts" shall
also include recelpts of any person received
as partlal or full compensation or
relmbursenent for, salaries, payroll taxes,
frlnge benefl ts ann any and all s1milar
expenses for persons who are employees of
said person and receipts of any person
received as partial or full cOP"pensation or
relmbursement for equlpment, supplles,
utilitles, or other items or services
acqulred by sald person in that person's na~e
and used or consumed in the performance of
serVlces.
(6 )
"Gross receipts"
shall not
include anyth1ng which the City of Santa
lbnica nay not lawfully lnclude by virtue of
the Constltution of the unlted States or the
Constltution of ele State of Callfornla.
(b) ~~en, by reason of the provisions
of the Constl tutlon of the Uni teCl States or
the Constitution of the State of Callfornla,
the bUSlness license fee lmposed by th~s
Artlcle cannot be enforced without there
being an apportionMent accordlng to the
amount of bUSlness done ln the Clty of Santa
r.1onlca, or in the State of California, as the
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case may be, the D~rector of Flnance , with
the approval of the C1 ty Attorney, may make
such rules and regulatlons for the
apportionnent of the tax as are necessary and
nesirable to overcone the constltutional
obJectlons. The apportlonment shall be marte
on the basis of payroll value and situs of
tangible property, general expense, or by
reference to any other nethod of
apportionPlent as w1.11 falrly determlne the
aMount of gross rece1pts derived from or
attributable to engaging 1n business in the
Cl ty. Gross receipts der1 ved from lsolated
or occaslonal transactions at places outsine
the City but wlthin the State of Californla,
where the IJ.censee is not regularly engaged
ln a course of bUSlness transactions shall be
deerled gross recelpts derived from engag ing
In business 1n the Clty. Gross receipts
derlved from or attrlbutable to sources
wltlnn the City incl ude gross recelpts frOM
tangible or lntangible property located or
ha vlng a si tus in the City and, when not
contrary to law, gross recelpts from any
activities carried on ln the City regardless
of whether carrled on in lnterstate,
1ntrastate, or foreign commerce.
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Sr:CTION 13.
Sectlon 6127 is added to the Santa Monlca
MUnlclpal Code to read as follows:
SECTION ~127. 0peration of 1983-B4 Tax
Rate Changes.
62l9A,
( a)
6223,
The anendments to Sectlons 6209,
6225, 6::!25A, fi226, 6236, 6240,
and 624nA contained in the ordinance adoptlnq
thlS Section shall be effective for license
year cOmrrlenclng on July 1, lSlR3, and endino
on June 30, 1984, as follows:
(l ) Th e
annual
license
fee
required by such Sect10ns shall be deternlned
on the basis of the gross receipts reported
In license year 1983-8L!. ln ac cordance with
th1s Code.
( 2 ) The
annual
l~cense
fee
requ1red by the predecessor of such Sections,
as effective prlor to the date of of adoptlon
of the OrQlnanCe adoptlng this Sectlon, shall
be deternlned on the baS1S of gross recelpts
reported in llceDse year 19P3-84 ln
accordance wlth thls Code.
( 3 ) Th e
anount determined in
accordance with subdlvision (a) (1) of this
Sectlon and the amount deterwined in
accordance with subdivlsion (a) (2) of this
Sectlon shall be totaled and dlvlded by 2.
22
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The aMount deternlned in accordance w1th this
subdivls10n shall be the a~ount of the annual
license fee for llcense year 1983-84.
(4) If a person has prevlously
paid to the Cl ty an annual llcense fee for
llcense year 1983-84 w1nch 1S less than the
amount deterP1ined ln accordance with
subdlv1sion (a) (3) of thlS Sectlon, the
person shall pay to the C 1 ty on or be fore
March I, 1Q84, an amount equal to tJ:;e
dlfference bety1een t"he annual llcense fee
c1etermine d in accord ance Wl th subd1 vis ion
(a) (3) of thlS Section and sucn amount
prevlously paid not lncluding any penalties.
( 5 )
If
a person
nas previously
11cense fee for
pald to the Cl ty an annual
license year 1983-84 which
lS
greater
than
the amount determ1ned 1n accordance Wl th
subdlvlslon (a) (3) of t~lS Sectlon, the Clty
shall refund to the person on or before t1arch
1, 1984, an aMount equal to the dif ference
between such amount prev10usly paid not
includlng any penalties and the annual
llcense fee determlned In ac cordance Wl th
suhdlvlsion (a)(3) of thlS Section.
(f:. )
For
license year 1983-84
only, and from the effectlve date of this
23
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Section, in lieu of the penal tle s prov lded
for ln Sectlons hl09 and 6112 of this Code, a
penalty of twenty-flve percent (25~) shall 0e
lJ11posed on the aPlount of the annual 11cense
fee deterrined in Rccordance wlth subdivislon
(a) (3) of thlS Sect1on. No person shall be
entltled to a refund of any penalties paid
prior to the effectlve date of this Section.
(7) In addltlon to the penalty
inposed by subdlv1s1on (a) (6) of this
Section, a penalty of twenty-five percent
(25%) shall be 1mposed on the amount of any
annual license fee determ1ned ln accordance
w1th SUbClv1sion (a) (3) of this Section
renain1ng unpald after r-1arch 1, 1984.
( 8 ) The
J1irector
of Finance
shall mail to all persons sUbJect to an
annual license fee pursuant to the Sections
set forth 1n subdivision (a) of this section,
a statement settlng forth the determJnation
of the annual llcense fee for license year
19P3-84.
( b)
'I'he
Sect~ons
c1escribed
In
subdlV1Slon (a) of thlS Sectlon shall be
fully effectlve, without regard to
subdlvlsion (a) of thlS Section and \.,ithout
other proration or other reductlon, except as
24
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required by other prov1sions of th1S Code,
for llcense year 19R4-85 anc each llcense
year thereafter.
(c) For those persons subJect to the
annual license fee requlred by Sections 6209,
621<)A, 6223, 6225, 6225A, 6226, 6236, and
6240, the speclal bUS1ness 11cense fee
requlred by Ordinance Number 702 (CCS) or
Ordinance Number q60 (CCS) shall be
Qeterrined on the basis of the annual llcense
fee deternlned 10 accordance with subdlvision
(a) (2) of this Section.
STCTIOJ'J 14.
Sectlon 62?5A is added to the Santa Monica
Municipal Code to reao as follows:
SECTlmJ 622 SA. Annual Li cens e Pee of
Regulated Utllities.
Whenever by virtue of
this Code an annual license fee is required
to be paid by any utillty subject to Article
XII I, Sect1.on ] 9 of the Constl tut10n of the
State of Californ1a, the annual llcense fee,
notwlthstanding any provislon to the contrary
contalned ln tl1is Code, shall be <::25.00
mininun, plus $1.25 per each 81,000 or
fractlon thereof of gross recelpts in excess
of ~50(), 000.
SEC'!'ION 15. Any provision of the Santa Honlca Municipal
Code or appendlces thereto incons1stent wlth the provlslons of
25
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th1s ord1nance, to the extent of such 1nconsistencies and no
further, are hereby repealed or I'lodifled to that extent necessary
to affect the provisions of this ordlnance.
SEC'T'IO~~ IE.
If any sect~on, subsection, sentence, clause,
or phrase of thlS ordinance lS for any reason held to be invalid
or unconstltutlonal by a deciSlon of any court of any competent
jurisdlctlon, such dec1sion shall not affect the valldlty of the
renalnlng portions of the ordinance.
The Clty Council ~ereby
declares that 1t would have passed this ordinance and each anc"
every sectlon, sur-sectlon, sentence, clause or phrase not
declared inval1(! or unconst1tutlonal wlthout regard to whether
any portion of the ordinance would be subsequently declared
invalid or unconstltut1onal.
SECTrmI 17.
The Mayor shall sign and the City Clerk shall
attest to the passage of thls ordinance.
ThlS Clty Clerk shall
cause the same to be published once in the officIal nev.;spaper
withln 15 days after its adoptlon.
~e ordlnance shall becone
effect1ve after 30 days from ltS adopt1on.
APPROVED AS TO Fom1:
....~ ". -^-~? .'t ~'";1;; ~ --. \.- .
.:t1N'~ ~ ~w~'--
Robert M. Hyers ~
Clty Attorney
26
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WHITMA~, MAHER. & WIESE
CERTIFIED PUBLIC ,,"CCOll'lT" >,,;TS
e
~LqO
-
'1
f ~!::;;
2:l3 WILSHII;:E BOULEVARD SUITE 545
SANTA ...ONICA CALIFORNIA 904Q'
39301.7
JAMES 0 WHIY-'AAhI CPA
LA~:!;IY H MAHER CPA
CHI>,.LE5 W WIESE CPI>,
September 27, 1983
The Honorable Ken Edwards
Mayor of the City of Santa Monica
1685 Main Street
Santa Monica, California 90401
Dear Sir:
We are writing to you to explain our opposition to the structure of the proposed Increase
in business tax rates in the CIty of Santa Monica and to express our concern about
the possible consequences of this measure, should it pass as currently written.
We believe that a tax rate schedule WhICh reflects an Increase of 462% (with no
maximum limitation to that increase) for certain categories of businesses, and Increases
ranging from two to three times lower on other businesses, is grossly inequitable. We
all understand I'ising costs and the need to Increase tax revenue in order to have the
funds to properly manage the City's affairs. However, the proposed discrepancies in
tax rates and in the application of exemptlons to those rates, places an unfair burden
on many who conduct business in Santa Monica. There cannot be any justification for
such blatant discrimination between various categories of businesses. We feel that all
types of businesses are necessary to the economic good health of the community.
Due to the recent lengthy recession, many busmesses have had to cut their costs
dramatically in order to survive. Sudden increases in taxes will result in increased
costs which cannot be passed on to clIents and customers. For example, our city tax
under this plan would increase from $285 to approximately $1,200. For a small firm
like ours, an inequitable cost increase of this nature, when coupled with the past several
years of economic bad times, will place an undue hardship on us, possibly resulting in
the necessity to reduce our staff. We feel certam that other small firms will find
themselves in similar positions. There can be no question that business cutbacks
adversely affect the well-being of the general community. We want Santa Momca to
prosper and to continue the fine growth it has experienced recently, not cut back.
The principals of our firm have been doing business in the general area for twenty
years, and we have been in our current location for eIght years. We are very active
in community affairs and encourage all our employees to partiCIpate in organizations
and actiVIties which support the general welfare of all residents and business people
in Santa Monica. We care deeply about the welfare of the City of Santa Monica and
therefore strongly urge you to give serious thought to meeting with members of the
e
The Honorable Ken Edwards
September 27, 1983
Page 2
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business community in order to revise the structure of this proposed tax increase. We
are sure that a more equitable rate structure can be found.
S}ncerely, L .tf!"
'~1 /l1c?~
Larry H. Maher
Charles W. Wiese
WHITMAN, MAHER &: WIESE
WMW/ab
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9/27/83
BUSINESS LICENSE TAX PROPOSAL
SUPPLEMENTAL INFORMATION
1) Public Informat~on Efforts Chronology
2) Comparison of Business License Tax Rates
Between Jurisdictions
3) Tax Changes for Typical Firms
4) Tax Rates As a Percent of Profit
5) Tax.Comparison for Typical Phys~c~an's Office
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Public Informat1on Efforts
Buslness License Tax Proposal
May 10, 1983
Presentatlon to Board of D1rectors
of Chamber of Commerce
May 10, 1983
May 11, 1983
(Est. )
May 20, 1983
May - June
June 14, 1983
June 21, 1983
Council Study Session
Evening Outlook and Los Angeles Times
Coverage of Proposals
Dlscussed in Proposed Budget Message
Executive Br1ef for distribut10n
Council Study Session
Budget Publlc Hearing and endorsement
of concept
June - July 1983
LeB called Jerry Jackson - offered to
staff work1ng group of Chamber
July 28, 1983
Handouts mailed to Chamber
July - August
Seascape article
August 9, 1983
Evenlng Outlook major art1cle
August 31, 1983
MS spoke to Main Street Merchants
September 1983
Chamber of Commerce Newsletter article
September 20, 1983
LCB and MS spoke to Chamber Local
Leg1slat1ve Comm1ttee
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9/27/83 e e
"
TAX CHANGES FOR TYPICAL FIRMS
(2 ) (3)
(1) Endorsed Tax Change
Group Affected Tax Now 1983-84 1984-85 (2)-(1) (3)-(1)
3,399 Average Prof/Servo
GR;;;;;$325,OOO $227 $601 $ 975 $ 374 $ 748
3,399 Med1an Prof/Servo
GR=$58,OOO 54 114 174 60 120
339 Tap 10% of Prof/Serv
GR~$372,OOO 258 687 1,116 429 858
2120 Averaoe Retail
GR=$426,OOO 268 147 25 (121) (243 )
2120 Hed1an Reta~1
GR=$117,00O 89 57 25 (32) (64 )
212 Top 10% of Retail
GR1$669,000 420 328 236 (92) (184)
Ketall Breakeven
Point GR;;;;;$952,307 590 590 590 0 0
Only the 139 retail flrms w1th GR., $952,307 "1111 exper1ence increases.
117 l\_v2rage MF
GR=-$1,263,00O 651 719 788 68 137
117 Med1an rfl.F
GR=$101,OOO 70 48 25 (22 ) (45)
11 Top 10% HF
GR~$6,802,OOO 3,421 4,874 6,327 1,453 2,906
r-1F Breakeven
POlnt GR=$990,000 515 515 515 0 0
Only the 59 wholesafe/rnanufacturlnQ flrms with GR> $990,000 wll1
experience increases.
$
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9/26/83
TAX RATES AS A PERCENT OF PROFIT
Pre-tax Effect~ve Tax ~ax Rate as Post-tax
Category Proflt IvTarg1n Per $100 GP % of Proflt Prof1t
PROF/OCC/
SERVICES 11. 6% $11.60/100 Now: 6~9 0.5% $11.53/100
New: 30e;: 2.5% 11.30/100
RETAIL 3.9% 3.90/100 Now: 69 1. 5% 3.87/100
New:
H1 12~<: 3.2% 3.78/100
@2.1SM 9 3/4<: 2.5% 3.80/100
Lo 5<: 1. 2% 3.85/100
~.:::EY FIKDn~GS:
(A) Under present tax rates, professlonal/occupational/s~rvice
fLrRS are taxed at one-third the share of profit of
reta11 firms.
(B) Under endorsed tax rates, taxes as a share of proflt
\lould be equalized for both sectors at S2.18 ~111ion and
would result in an overall sroaller range of dlfference
ln tax rates as a share of proflt.
Source of data: :s.obert norr1S Associates 'S2 Annual Statement Stud1es~
operat1ng prof1t percentages def~ned as gross profit
mlnus operatlng expenses.
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PH'ISICAA'N ts O?P\C~
(GrD5s yeceipts ba.oed 01\
Qv'ei~ si-z..e. Dr-- is Omce in
'So.Jt~ ~CA.; I Mv"e.
A ~~ed if\~ ~Jo ~tN\t aoJ-o. )
5~~ ~CL: ,..~ Ntvr
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t qst.t-flS
Los ~&I
C~~ Gi~
based OY'\
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