Business License Modernization Ballot Measure J

Los Gatos Business License Program Modernization
November 8, 2022 Ballot

The Town Council of Los Gatos unanimously approved the placement of an update to the Town’s business license program on the ballot for the November 8, 2022, General Municipal Election.  A four fifths (4/5) vote of the Town Council was required to adopt the resolution to submit the Council’s ballot measure to the voters.  A majority vote of the Town's qualified voters is needed to approve the ballot measure.  Provided below is the ballot language as it will appear on November 8, 2022.  

Shall the measure to fund critical Town needs such as public safety by amending business license taxes, unchanged since 1991 while inflation increased 117%, to increase flat taxes by 30%, adjusted annually for inflation, Retailing gross receipts tax by 40%, and to add E-Commerce to the Manufacturing, Wholesaling, and Jobbing gross receipts tax schedule and increase that schedule by 120%, raising about $1,100,000 yearly for general fund purposes until ended by voters, be adopted?

YES 

NO

In conjunction with the aforementioned ballot language pursuant to State law, the Council introduced an Ordinance which corresponds to the measure.   Both the Resolution and the Ordinance contain additional pertinent information associated with the measure.  Copies of the Resolution and Ordinance can be viewed here:

Important Dates

  • August 16, 2022 at 4:00 p.m. - Deadline to submit arguments in favor of or against the ballot measure
  • August 17 to August 26, 2022  - Examination period for all primary arguments filed
  • August 23, 2022 at 4:00 p.m. - Deadline to submit Impartial Analysis and rebuttal arguments to primary arguments in favor of or against the ballot measure
  • August 24 to September 2, 2022 - Examination period for Impartial Analysis and all rebuttals filed

Current Business License Tax Program

The Town's Business Tax Ordinance was adopted on June 3, 1991, and has not been amended.  The current ordinance did not contemplate inflation adjustments or other predetermined structural rate changes, therefore leaving the original rates in place since then.

The Town Business License Tax program is governed by Chapter 14 of the Los Gatos Town Code.   Articles I through III of the business license chapter are enacted solely to raise revenue for municipal purposes that serve the Town’s businesses and their employees and are not intended for regulation.

The Town issues different types of business licenses based on the type of activity.  The amount of business license tax paid by each business is also based on its business activity because the purpose of the tax is to cover municipal services and infrastructure utilized by the business, its employees, and customers.  Fees for activities such as wholesalers and manufacturing are charged on a sliding scale based on gross receipts, as is retail, with retail being capped at $975.  These gross receipt activities account for approximately 25% of annual business licenses, while the remaining 75% are flat fee businesses.  While the Town Code lists different license types, the most common ones are listed below with the appropriate business license tax and fees.

Typical Business License taxes and Fees

Why Modernize the Business License Tax?

As previously mentioned, the Town has not updated the existing Business License Tax Program since 1991. 

Did the Town consider cutting expenditures in addition to revenue measures?

As an employer that provides mostly services, the majority of the Town’s expenses are related to personnel costs.  As the chart below illustrates, since 2001 the Town organization utilized reductions in full time equivalent benefited employees (FTE’s) to manage personnel costs and ultimately downsized the organization approximately 15 percent.

Staffing Numbers

Did the Town consider other revenue measures?

Yes, over the years the Town has added additional revenues in an incremental and diversified way.  Following are revenue measures to date.

  • November 2016 Measure T increased the Transient Occupancy Tax (TOT) from 10 percent to 12 percent.  The 2% increase raises approximately $400,000 annually in additional revenue.
  • November 2018 Measure G creates a 1/8 cent dedicated district sales tax for a 20-year period.  The adoption of the dedicated tax provides approximately $1,000,000 annually in additional revenue. 
  • In February 2019, Council approved an Ordinance allowing regulated short-term rentals subject to TOT.   Approximately $80,000 of additional TOT is collected annually.
  • In June 2019 Council voted to annex 24 unincorporated County pockets.  This action results in approximately $1,000,000 in property taxes remaining in the Town instead of being diverted to the County.

How did the Town Council decide to place this measure on the ballot?

For the past year, the Town Council Finance Commission and the Town Council have deliberated providing the residents of Los Gatos with the opportunity to decide if modernizing the business license program was warranted.  Over the course of those deliberations, the Town Council ultimately determined by a unanimous vote to place the measure on the ballot.  Following is the chronology of Town Council Finance Commission and Town Council meetings when the sales tax measure was discussed:

On September 13, 2021, the Town Finance Commission reviewed the Town’s Business License Tax Program and recommended that the Town Council authorize the Town Manager to issue a Request for Proposal (RFP) for consultant services to evaluate and recommend modernization options for the Town’s Business License Tax Program.  The staff report is available on the Town website.

On October 19, 2021, the Town Council received the Finance Commission recommendation and directed staff to engage a consultant to review the Town's 1991 Business Tax Ordinance and recommend options for modernizing the Ordinance.  The staff report is available on the Town website.

On December 17, 2021, the Town issued a Request for Proposals (RFP) for Business License Tax consulting services.  Hinderliter, deLlamas & Associates (HdL) Companies was selected given their significant experience in business license review and analysis, including having performed dozens of tax study and modernization programs in California. 

HdL submitted their Business License Analysis and Ordinance Review (Report) to the Town on June 8, 2022. 

On June 13, 2022, the Finance Commission discussed the HdL Report and voted unanimously to move forward to continue research and public outreach on business license tax modernization.  The staff report is available on the Town website.

On June 21, 2022, the Town Council unanimously directed staff to continue conducting research and public outreach and prepare two options for proposed ballot measure language for Council consideration on August 2, 2022.  The staff report is available on the Town website.

On July 25, 2022, the Town hosted a business license modernization informational webinar via teleconference.  The meeting provided an opportunity for Town residents and businesses to learn more about the background and potential business license modernization, discuss each of the proposed options under consideration, ask questions, and provide feedback.  The materials from the meeting are available below:

Audio Recording
Slideshow Presentation
Zoom Poll Question Results 

On August 2, 2022, the Town Council unanimously asked staff to return at a special meeting prior to August 12 with a draft resolution to encompass a 120% tax increase in E-Commerce, Manufacturing, Wholesaling, and Jobbing gross receipts, a 40% increase in Retailing gross receipts, a 30% increase for flat fees, and implement an ongoing Bay Area Consumer Price Index adjustment to account for future inflation on flat fees.  The staff report with attachments, desk item, and full video recording of the meeting are available on the Town website.

On August 11, 2022, the Town Council unanimously voted to adopt a resolution of the Council of the Town of Los Gatos, calling a Municipal Election for November 8, 2022, requesting that the County consolidate the Municipal Election with the General Election on November 8, 2022, and submitting to the qualified electors of the Town at the November 8, 2022 Consolidated General Election a Measure to amend Chapter 14 of the Los Gatos Town Code Relating to business license taxes. The staff report with attachments and a full video recording of the meeting are available on the Town website

How will this change what I currently pay as a business?

All businesses will continue to pay in the same business license category they currently pay under which is either a flat fee or gross receipts reporting for Retailing or E-Commerce, Manufacturing, Wholesaling, and Jobbing.  Following are the adjusted tables which reflect what a business is currently paying and the updated payment if the ballot measure is passed by the voters of Los Gatos.  The tables are updated to reflect a 30% increase for flat fees, 40% increase in Retailing gross receipts, and120% increase in E-Commerce, Manufacturing, Wholesaling, and Jobbing gross receipts.

Flat Fee Schedule 

If approved by voters, the current flat fee schedule will be adjusted 30%.  The updated table below illustrates the proposed changes to the current flat fees.

In addition, on January 1 of each year the tax rates in this section shall be automatically adjusted by a percentage equal to the percentage increase or decrease in the Consumer Price Index for the preceding CPI Year as published by the U.S. Bureau of Labor Statistics for “All Urban Consumers for All Items for the San Francisco-Oakland-Hayward Area.

 

Current

Proposed

Advertising signs




Signposting and painting

$420.00 

$546.00 

Amusement




Shows, concerts, and the like (per day)

$42.00 

$54.60 


Circuses, menageries and the like:




Less than 2,000 seating capacity




     First day

$420.00 

$546.00 


     Each succeeding day

$52.50 

$68.25 


More than 2,000 seating capacity




     First day

$630.00 

$819.00 


     Each succeeding day

$105.00 

$136.50 


Sideshows (per day):




     Entrance fee not exceeding $0.10     

$21.00 



     Entrance fee exceeding $0.10

$42.00 



Circus procession or parade (each)

$210.00 

$273.00 


Carnivals (per day)

$42.00 

$54.60 


Ferris wheels, merry-go-rounds, and the like (per month)

$210.00 

$273.00 


Public dances (per dance)

$21.00 

$27.30 

Apartment rental and mobile home parks (per unit)

$7.50 

$9.75 


The term "apartment" includes all buildings or groups of buildings on the same premises, composed of a total of three (3) or more dwelling units



Auctioneers

$112.50 

$146.25 

Billiard and Pool Rooms (per table)

$52.50 

$68.25 

Boardinghouses




Boardinghouses licensed by the state or county as boardinghouses for pensioners, and who board pensioners exclusively, are exempt from the business license tax.




     For first 4 boarders

$21.00 

$27.30 


     For each person over 4

$4.50 

$5.85 

Cleaning and dyeing laundry delivery




Vehicles (annual, per vehicle)

$168.00 

$218.40 


The tax applies to those who have no fixed place of business in the town.



Contractors (annual)

$224.00 

$291.20 


A separate fee for each type of work activity, such as general engineering, building, plumbing, plastering, painting, masonry, termite service, installation or other specialty, in addition to any sales or jobbing license fee. Contractors with businesses not located in Los Gatos but doing a short-term work activity may pay the daily fee when the job including inspection is finished within a day. A contractor must show proof of a valid California Contractor's License or a signed Declaration of Exemption from California Contractor's License law.




Contractors (daily)

$105.00 

$136.50 

Day care facilities




Day care facilities provide day care for children under eighteen (18) years of age who are unrelated to the licensee.




Small family day care home (a facility providing day care for six (6) children or less, including resident children)

No fee

No fee


Large family day care home (a facility providing day care for seven (7) to twelve (12) children, including resident children)

No fee

No fee


Nursery school (a facility providing day care for thirteen (13) or more children)

No fee

No fee

Hospitals, rest homes, and the like:




Annual, or

$140.00 

$182.00 


Per bed, if that is larger

$10.00 

$13.00 

Hotels and motels (annual, per guest room)

$7.50 

$9.75 


Business activities other than renting rooms, conducted in connection with a hotel, are taxed separately.



House movers




Annual license

$105.00 

$136.50 


Additional, per structure moved

$84.00 

$109.20 

Itinerant photographers(annual)

$210.00 

$273.00 

Itinerant vendors (daily)

$105.00 

$136.50 


The words "itinerant vendor" mean any person, both principal and agent, who engages in a temporary and transient business in the Town selling goods, wares and merchandise with the intention of continuing such business in the Town for a period of not more than ninety (90) days, and who, for the purpose of carrying on such business, hires, leases or occupies any room, building or structure for the exhibition or sale of such goods, wares, or merchandise, or from which room, building or structure the sales shall be made or business solicited by means of samples or delivery from house to house. The person so engaged is not relieved from the provisions of this section by reason of associating temporarily with any local dealer, trader, merchant or auctioneer, or by conducting temporary or transient business in connection with, or as a part of, or in the name of any local dealer, trader, merchant or auctioneer. The provisions of this section do not apply to commercial travelers or selling agents selling their goods to dealers, whether selling for present or future deliveries, by sample or otherwise, nor to hawkers on the street, nor peddlers from vehicles, nor to persons selling fruit, vegetables, butter, eggs, or other fruit or ranch products.



Junk collectors (annual, per vehicle)

$84.00 

$109.20 


Junk collector means any person who has no fixed place of business in the Town and who engages in or carries on the business of collecting, buying or selling any old rags, sacks, bottles, cans, papers, metals or other articles of junk.



Junk dealers (annual)

$420.00 

$546.00 


Junk dealer means any person who has a fixed place of business in the Town, and who engages in or carries on the business of buying or selling, either at wholesale or retail, any old rags, sacks, bottles, cans, papers, metals or other articles of junk.



Peddlers




Peddlers of wares other than food, per person, per day

$21.00 

$27.30 


Peddlers of food, except lunch wagon operators:




Using a vehicle (per vehicle, annual)

$210.00 

$273.00 


Not using a vehicle, carrying wares by hand

$42.00 

$54.60 


Lunch wagon operators (per vehicle, annual)

$210.00 

$273.00 


Peddlers engaged in the business of selling any personal property at a sale conducted by an organization exempt from the business license tax under the provisions of section 14.10.030 of this chapter shall pay a license tax of $7.50 $9.75 per day. This rule applies only when all fees, commissions or other remuneration of any kind paid by the peddler to the organization conducting, sponsoring or promoting the sale is devoted exclusively to the business license tax-exempt purposes of the organization and the organization has obtained prior approval from the Town Council to conduct the sale, per day $7.50 $9.75 

 

A "peddler" is every person not having a regularly established place of business in the Town who travels from place to place, or has a stand upon any public street, alley or other public place, doorway or any building, unenclosed or vacant lot, or parcel of land, who sells, offers for sale, any goods, wares or merchandise in the peddler's possession.

$7.50 

$9.75 

Professional and semiprofessional occupations




Per professional or semiprofessional person

$200.00 

$260.00 


Support Staff additional per employee

$15.00 

$19.50 


Professional services are occupations in the service sector requiring special training in the arts or sciences. Some professional services require the practitioner to hold professional degrees or licenses and possess specific skills.  Other professional services involve providing specialist business support to businesses of all sizes and in all sectors.  Professional Services means the business is offering any professional, scientific, or technical service including, but not limited to legal advice and representation; accounting, bookkeeping, and payroll services; architectural, engineering, and specialized design services; computer services; consulting services; research and development services; advertising services; photographic services; translation and interpretation services; veterinary services; and other professional, scientific, and technical services.  Professional or semiprofessional business or service occupations include, but are not limited to, the following: Accountant; Advertising counsel; Appraiser; Architect; Artist; Assayer; Attorney at-law; Auditor; Bacteriologist; Broker, stock or bond; Chemist; Chiropodist; Chiropractor; Dental hygienist, Dentist; Designer or decorator; Detective or investigative personnel; Draftsperson; Drugless practitioner; Electrologist; Engineer: civil, mining, electrical, construction; Engineer: structural, consulting, mechanical, hydraulic; Engraver; Feed, grain and fruit broker; Geologist; Illustrator or showcard writer; Landscape architect; Lapidary; Lithographer; Licensed financial planner; Licensed investment counselor; Masseuse or masseur Marriage Therapist; Massage Therapist; Nurse; Oculist, optician or optometrist; Osteopath; Physical therapistPhysician; Property Management; Reals estate brokers; Surgeon; Surveyor; Taxidermist; Veterinarian; X-ray, dental or medical laboratory




Support staff include, but are not limited to the following: receptionist, office assistant, real estate agents



Service occupations

$100.00 

$130.00 


Service occupations include, but are not limited to the following: appliance, home furnishing or radio and television installation, janitorial and building maintenance, landscape installation and maintenance, secretarial service, security guards, etc.



Shooting galleries

$105.00 

$136.50 

Solicitors (per business)

$210.00 

$273.00 


A solicitor is one who engages in the business of going from house to house, place to place or in or along the streets within the Town selling or taking orders for, or offering to sell or take orders for, goods, wares, merchandise, advertising or other things of value for future delivery, or for services to be performed in the future.



Taxicabs




Per business

$150.00 

$195.00 


Additional per taxi

$22.50 

$29.25 

Theaters and concert halls

$105.00 

$136.50 

Trucking (annual, per vehicle)

$140.00 

$182.00 


Persons other than peddlers who sell or deliver food or any other goods by means of a vehicle, and who have no fixed place of business in the Town. Persons who make no more than two deliveries or sales per quarter are exempt from the foregoing tax. All other motor vehicle delivery business, whether the business operates on a regular route or between fixed termini or not:




For one vehicle

$45.00 

$58.50 


For each additional vehicle

$22.00 

$28.60 

 

 Retailing Gross Receipts Schedule

If approved by voters, the current Retailing gross receipts schedule will be adjusted by just 40%.   The updated table below illustrates the proposed changes to the current Retailing Gross Receipts schedule.

Retailing Gross Receipts Schedule


E-Commerce, Manufacturing, Wholesaling, and Jobbing Gross Receipts Schedule

If approved by voters, the current Manufacturing, Wholesaling, and Jobbing gross receipts schedule will be adjusted by 120%.  In addition, the schedule will include E-Commerce. The updated table below illustrates the proposed changes to the current  E-Commerce, Manufacturing, Wholesaling, and Jobbing gross receipts schedule.

E-Commerce, Manufacturing, Wholesaling, and JObbing Gross Receipts Schedule