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  Business License Fees for Rental Properties
October 5, 2005

There is a widespread buzz in Richmond among landlords about a letter recently sent out by the City of Richmond Finance Department that includes the following:


Our records indicate that you may be engaged in business within the City of Richmond without a City business license. The municipal Code of the City of Richmond requires all entities engaged in business within this City to have a business license. Engaged in business includes the rental of commercial or residential property. A separate business license must be obtained and paid for each rental property address.


The annual business license fee is $234.10 for each rental property address. If you have employees located in Richmond, there is an additional license fee of $46.80 per employee for the first 25 employees; and $40.10 per employee in excess of 25 employees.


I have received a number of phone calls and emails about this “new” tax, and by some accounts, the Finance Department phone mail is clogged with messages, and no one is answering.


As a public service, the E-FORUM never sleeps, and here is the explanation as best I understand it.


Richmond has a Business License ordinance, RMC Chapter 7.04 (http://bpc.iserver.net/codes/richmond/index.htm), that has been on the books many years. 7.04.010 states: “It shall apply to all persons, firms or corporations engaged in business in the City of Richmond.”


The ordinance lists specifically a number of types of businesses and the applicable fee. Many of these are arcane, such as


  • Itinerant shows, circuses, carnivals, rodeos and hawkers

  • Auctioneers and auctions

  • Arcade and shooting gallery

  • Vendors of racing forms.


Others are more mainstream and contemporary, such as:


  • Motion pictures.

  • Child care homes.

  • Contractors licensed by state.


However, most business types, such as snake charmers, lawyers, fortune tellers and architects, are not specifically listed. The rest of us are covered by 7.04.030:


Every person engaged in the manufacturing, wholesaling or retailing business or providing any service to the public or engaging in or conducting any other business not elsewhere in this chapter specifically mentioned shall pay annually a license fee of two hundred thirty-four dollars and ten cents ($234.10) plus an additional sum of money equal to forty-six dollars and eighty cents ($46.80) per employee for the first twenty-five employees and forty dollars and ten cents ($40.10) per employee in excess of twenty-five employees.


And, 7.04.020 states:


Engaged in business” means the conducting, managing or carrying on of any business herein specified by any person as owner, officer, agent, manager, employee, servant, or lessee.


For the same reason that the City of Richmond does many strange and inexplicable things, it never occurred to anyone in City government that renting property might actually be a business. In fact, former City Attorney Malcolm Hunter had opined in 1992 that renting property was not a business.


That opinion prevailed until 2005, when Acting City Attorney Everett Jenkins stepped up to the plate and opined (rightly so, I might add) otherwise. The good news to all you landlords (including me) is that we have saved a lot of money over the years. Jenkin’s opinion, which may be worth over a million dollars a year for Richmond just might be the most important thing he has ever done. It started a chain of events that resulted in the letters advising landlords that it is time to pay up.


This fee or tax is not at all unusual. Most cities routinely collect business license fees from landlords. In fact, if you own and rent out property in El Cerrito you’ll pay $79 per residential unit.


So, this is not a new tax or fee, it is simply the first time Richmond has endeavored to collect a fee that has been on the books for many years and to join most other cities in requiring business licenses for landlords.


There are, however, some unanswered questions, which I will endeavor to answer:


  • Q. Does the fee cover just to the end of this calendar year? A. No, licenses run annually from the date of payment to its anniversary.

  • Q. If a property owner has more than one unit at a single location, such as a duplex or fourplex, each of which has a separate address, is a license required for each? A. No, under 7.04.230, a person operating more than one business from a single location is only required to obtain a single license. Thus a duplex, fourplex or 20-unit apartment building would require only a single license.

  • Q. If a property owner rents several single family homes at different locations, is a license required for each? A. yes, under 7.04.230, a business license is required for “each branch establishment or location.”


As Richmond has struggled for revenue, thus is not the first tike the City only had to look within. Simply not aggressively collecting business license fees, other than from landlords) over the years has cost the city millions (see Business License Scofflaws Cost Richmond $$ February 29, 2004).


In 2002, I first started looking into business licenses as a source of revenue in Richmond. Like most cities, Richmond uses its business license fees simply as a source of general fund revenue – a tax.


What I found is that Richmond’s current Municipal Code Chapter 7.02, Business Licenses, which includes a fee structure, dated essentially from 1986.


Chapter 13.45 of the Richmond Municipal Code, passed as ordinance 20-78 N.S. in 1978, requires quarterly adjustments of fees, such as for business licenses, based on the Consumer Price Index.


In 1986, the Consumer Price Index (San Francisco Area) was at 112.4. in 2002 it was at 193.5, a 72.15% increase. The FY 2002-2003 budgeted income from business license fees was $1,087182. If Richmond had updated fees to keep pace even with inflation, the FY 2002-2003 budgeted income from business license fees would have been $1,733,863, an increase of $646,681.


City Attorney Malcolm Hunter at first told me that increasing the business license fees would require an election pursuant to proposition 218. When I sought legal advice from outside experts and other city attorneys that contradicted Hunter’s advice, he eventually reversed himself, and the City increased fees accordingly.


three years later, the City is now collecting over $2 million in business license fees, and this should increase by another million when the landlord fees kick in.