|More Business License Questions
October 11, 2005
I received over 40 questions, suggestions, complaints and accusations about business licenses over the past week. Here are some more Q and A:
Q. Is a business license a tax or a fee? What am I getting for it?
A. Legally, it is a general tax, not a fee. Richmond Municipal Code Section 7.04.010, “Purpose,” states: “This chapter is enacted solely to raise revenue for municipal purposes and is not intended for the purpose of regulation.” Proceeds go into the General Fund and can be used for any purpose approved by the City Council. Whatever you get from the general fund is partially paid for by business licenses.
Q. Why is the allocation of fees unfair? Why not charge the same amount for each unit? Why should a single family home pay the same as a 30-unit apartment building?
A. Sure, there clearly is a more equitable way of assessing this tax. However, the ordinance dates from 1986 and, pursuant to Proposition 18, can only be changed by placing an amendment on the ballot in a City election. Proposition 218 is an amendment to the California Constitution (Articles XIIIC and XIIID) which, as it relates to general taxes, requires the local government to have a majority vote for any proposed new or increased assessment before it could be levied. More information on Proposition 218, which was passed by California voters on November 5, 1996, is available at http://www.ccp.ucdavis.edu/pubs/pdf/ccpt1may.pdf.
There surely are more equitable ways of assessing this tax, but the City Council has discussed it for at least a couple years and has not developed a sufficient consensus to act. Most cities either charge a fixed amount per unit or an amount based on the gross receipts. The California Apartment Association, which is the primary lobbyist for large apartment owners, does not like gross receipts taxes. Even if the City Council developed a consensus, an amendment that revises the allocation formula would still have to go to the voters and receive a majority vote.
Q. I went to the http://gisweb.ci.richmond.ca.us/BusinessLicense/ and could not find a record of a business license for X company.
A. It helps to use the “wild card” with asterisks on either side of one word that you are pretty sure is part of the name unless you know exactly how a company is listed. For example, I entered “Interactive Resources,” the name of my business, and came up empty. Then I entered *Interactive* and found it listed as “Interactive Resources, Inc.” For Chevron companies, enter *Chevron* and you will get whole list.
Q. What if I don’t comply? What is the enforcement?
A. Delinquencies result in increased fees, and failure to obtain a license can result in a court action by the City, a judgment and any legal means of enforcing it, including a lien on real property. Failure to display a license on demand is a misdemeanor.
Q. I have no business and no rental. I live outside Richmond. Why did I get a letter?
A. Although I do not know exactly how the mailing list was compiled, I can deduce a few things. If you own a dwelling unit and do not have a homeowner’s exemption, it could be reasonably concluded that it is a rental property. (If you own and occupy your principal place of residence on January 1, you may apply for a Homeowner's Exemption that would exempt $7,000 of your home's assessed value from taxation. This would result in a savings of approximately $70 per year on your property tax bill. For further information, call 925/313-7481).The mailing list information came from the Contra Costa County Assessor, and there may be mistakes in the data. Addresses are also confusing. Some addresses outside the City limits have “Richmond” mailing addresses, while some within the City limits have “San Pablo” or other City mailing addresses. Even some vacant lots are rented (for example, as parking lots) and are therefore businesses.
Q. Do owners of second units have to have business licenses?
A. Yes. Second units, commonly called “in-law units” are governed by 15.04.810.020 of the Richmond Municipal Code and are also required to have a second dwelling Unit Permit (15.04.810.030). Violations can be penalized according to 15.04.950 and 15.04.990.
Q. What is the rule about multiple addresses?
A. If a property owner has more than one rental property and those rental properties are located at two distinct locations, then the property owner is required to obtain a business license for each separate property. However, a person owning a single building that contains multiple units has to obtain only one license, even if the units have different addresses. Where units are in multiple buildings under common ownership, a separate license must be obtained for each building.
Q. how does this apply to commercial property owners?
A. All rental commercial properties require licenses under the same rules about location that apply to residential properties.
Q. Are independent consultants working out of their own homes required to have business licenses?
A. Basically, yes, unless the business is conducted solely by a minor or has a gross income less than $600. A home occupation also requires a Certificate of Home Occupation and must conform to 115.04.810.012 . A home occupation is a business enterprise conducted in a dwelling unit, garage or accessory building in a residential district that is incidental to the principal residential use and which is consistent with the criteria in 15.04.810.012.