Attachment 1 - October 19 2021 Council Staff ReportPREPARED BY: Arn Andrews
Assistant Town Manager
Reviewed by: Town Manager, Town Attorney, and Finance Director
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 10/19/2021 ITEM NO: 9
DATE: October 11, 2021
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Receive the Town Finance Commission Recommendation and Authorize the
Town Manager to Issue a Request for Proposals (RFP) for Consultant Services
to Evaluate and Recommend Modernization Options for the Town’s Business
License Tax Program.
RECOMMENDATION:
Receive the Town Finance Commission recommendation and authorize the Town Manager to
issue a RFP for consultant services to evaluate and recommend modernization options for the
Town’s Business License Tax Program.
BACKGROUND:
On September 13, 2021, the Town Finance Commission reviewed the Town’s Business License
Tax Program. The Town's Business Tax Ordinance was last adopted on June 3, 1991
(Attachment 1). The Town Business License Tax program is governed by Chapter 14 of the Los
Gatos Town Code: Los Gatos Town Code - Business Licenses. The Articles I through III of the
business license chapter are enacted solely to raise revenue for municipal purposes and are not
intended for regulation. The Town currently has 2,557 businesses in active pay status and
another 2,577 registered on the books of which it is estimated that a third may still be active in
Town. This Tax, which is charged to business owners, currently generates approximately $1.4
million annually.
DISCUSSION:
Having not been updated in over 30 years, the current rate structure does not take into account
shifts in business models and delivery over the decades. In addition, the current ordinance
does not contemplate inflation adjustments or other predetermined structural rate changes,
therefore leaving the rates unchanged for 30 years.
ATTACHMENT 1
PAGE 2 OF 3 SUBJECT: Business Tax Modernization DATE: October 11, 2021
DISCUSSION (continued):
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 wholesales 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 list different license types, the
most common ones are listed below with the appropriate business license tax and fees.
Most cities in the Bay Area and throughout California have either updated their tax structure
through local ballot measures or enacted a tax if they previously didn’t have one. In California,
all taxes imposed by local governments are classified as either general or special taxes and must
be put before voters as a local ballot measure for approval. Recent examples of general
business tax ballot measures include:
• Daly City – Measure BB 2018 (approved 80.64%)
• Mountain View – Measure P 2018 (approved 71.05%)
• Sausalito – Measure M 2018 (approved 65.42%)
• Berkley – Measure U1 2016 (approved 74.93%)
• Monterey – Measure H 2016 (approved 73.86%)
• San Jose – Measure G 2016 (approved 65.59%)
• Foster City – Measure U 2013 (approved 73.2%)
• Campbell – Measure M 2010 (approved 69.59%)
Business License Processing Fee
(Annual)
Planning Fees - Businesses Located in Los Gatos
(One-time )
State Mandated Fee
(Annual)
Type of Business License
Business License Tax - Without
Penalty
Minimum (Annual)
Business License Tax - Without
Penalty
Maximum (Annual)
Typical Businesses
Retail
(Based on Gross Receipt)$75 $975 Restaurant, Grocery Store , Gas Station, Hair Salon
Wholesale/Manufacturee/Wholesale/Ecommerce
(Based on Gross Receipt)$150
Based on sliding scale
$4,837.50 for $12,000,000 in gross receipt
plus $75 for each $550,000 or fracntion
therfor in excess of $12,000,000
Netflix, Manufacturers
Professional/Semiprofessional
(per employee)$200 $200 Medical Doctor, Attorney, Tutor,
Massage Therapist, Broker
Support Staff - Professional/Semiprofessional
(per employee)$15 $15 Real Estate Agent
Service
(per business)$100 $100
Gardeners, Repair Service, Hair
Stylist, Janitoral service
Contractor(per business)$224 $224 Licensed California State Contractor
Typical Business License Taxes and Fees
$40 at the Time of Establishment/ $30 at Renewal - Located In Los Gatos
$20 - Not Located in Los Gatos
$161.20 Home Occupancy Permit - Home Based Businesses$176.70 Change of Occupancy / $262.20 Change of Use - Commercial Zoning
$4
PAGE 3 OF 3 SUBJECT: Business Tax Modernization DATE: October 11, 2021
CONCLUSION:
The Finance Commission has recommended that the Town Council consider pursuing the
modernization of the Business license Tax schedule adopted in 1991. To better understand the
Town’s Business License Tax program, the Council should authorize the Town Manager to issue
a RFP for the review and recommendation of modernization options for the program.
COORDINATION:
This staff report was coordinated with the Town manager, Town Attorney, and Director of
Finance.
FISCAL IMPACT:
There is no cost associated with issuing the RFP. Based on the results of the RFP, staff will
return to Council with budget recommendations based on the successful RFP response.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachment:
1. 1991 Business Tax Ordinance
This Page Intentionally Left Blank
ORDINANCE 1857
ORDINANCE OF THE TOWN OF LOS GATOS
AMENDING CHAPTER 15, ARTICLE II OF THE TOWN CODE
THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES HEREBY ORDAIN:
SECTION I
Article II of Chapter 15 of the Town Code is hereby repealed in its entirety.
SECTION II
Article II of Chapter 15 of the Town Code is hereby enacted to read as follows:
ARTICLE II
SCHEDULE
Section 15 -27. Gross Receipts Tax
Every person doing business in the Town, except those persons whose business is taxed under the
terms of Section 15 -28 shall pay an annual license tax based on the gross receipts of the business.
The tax is levied according to one or both of the following schedules. When the business activities
of one person, taxable under the provisions of this section, involve both retail and manufacturing,
wholesaling or jobbing transactions, the total gross income is apportioned between the two
schedules, according to its source.
Retailing
At Least But Less Than Tax
0 50,000 75.00
50,000 100,000 112.50
100,000 150,000 150.00
150,000 200,000 187.50
200,000 250,000 225.00
250,000 300,000 262.50
300,000 350,000 300.00
350,000 400,000 337.50
400,000 450,000 375.00
450,000 500,000 412.50
500,000 600,000 450.00
600,000 700,000 487.50
700,000 800,000 525.00
800,000 900,000 562.50
900,000 1,000,000 600.00
1,000,000 1,100,000 637.50
1,100,000 1,200,000 675.00
1,200,000 1,300,000 712.50
1,300,000 1,400,000 750.00
1,400,000 1,500,000 787.50
1,500,000 1,600,000 825.00
1,600,000 1,700,000 862.50
1,700,000 1,800,000 900.00
1,800,000 1,900,000 937.50
1,900,000 2,000,000 975.00
and above)
MGR035 A: \FEES \0RDINANC
ATTACHMENT 1
Section 15 -28. License Taxes for Specified Businesses
Every person doing any of the kinds of business specified in the subdivisions of this Section 15-
28 shall pay the business license tax specified in such subdivision. The fees are annual unless
otherwise specified.
Sec. 15- 28.02. Advertising Signs
Signposting and painting .... ............................... 420.00
MGR035 A: \FEES \ORDINANC 2
Manufacturing, Wholesaling and Jobbing
At Least But Less Than Tax
0 200,000 150.00
200,000 300,000 187.50
300,000 400,000 262.50
400,000 500,000 337.50
500,000 600,000 450.00
600,000 800,000 562.50
800,000 1,000,000 675.00
1,000,000 1,200,000 787.50
1,200,000 1,400,000 900.00
1,400,000 1,600,000 1,012.50
1,600,000 1,800,000 1,125.00
1,800,000 2,000,000 1,237.50
2,000,000 2,500,000 1,350.00
2,500,000 3,000,000 1,462.50
3,000,000 3,500,000 1,575.00
3,500,000 4,000,000 1,687.50
4,000,000 4,500,000 1,800.00
4,500,000 5,000,000 1,912.50
5,000,000 5,500,000 2,025.00
5,500,000 6,000,000 2,137.50
6,000,000 6,500,000 2,250.00
6,500,000 7,000,000 2,362.50
7,000,000 7,500,000 2,175.00
7,500,000 8,000,000 2,587.50
8,000,000 8,500,000 2,700.00
8,500,000 9,000,000 2,812.50
9,000,000 9,500,000 2,925.00
9,500,000 10,000,000 3,037.50
10,000,000 10,500,000 4,500.00
10,500,000 11,000,000 4,612.50
11,000,000 11,500,000 4,725.00
11,500,000 12,000,000 4,837.50
12,000,000 4,837.50
plus $75.00
for each $550,000 or
fraction thereof in
excess of $12,000,000
Section 15 -28. License Taxes for Specified Businesses
Every person doing any of the kinds of business specified in the subdivisions of this Section 15-
28 shall pay the business license tax specified in such subdivision. The fees are annual unless
otherwise specified.
Sec. 15- 28.02. Advertising Signs
Signposting and painting .... ............................... 420.00
MGR035 A: \FEES \ORDINANC 2
Section 15- 28.04. Amusements
Shows, concerts, et cetera (per day) ...........................42.00
Circuses, menageries, etcetera:
Less than 2,000 seating capacity
First day ............. ...............................420.00
Each succeeding day ..... ...............................52.50
More than 2,000 seating capacity
First day ............. ...............................630.00
Each succeeding day ..... ...............................105.00
Side shows (per day):
Entrance fee not exceeding$.10 ..............................21.00
Entrance fee exceeding $.10 . ...............................42.00
Circus procession or parade (each) ............................210.00
Carnivals (per day) ....... ...............................42.00
Ferris Wheels, merry-go- rounds, et cetera (per month) .................210.00
Public dances (per dance) ... ...............................21.00
Section 15- 28.05. Apartment Rentals and Mobilehome Parks.
The term "apartment' includes all buildings or groups of buildings on the same premises, composed
of a total of three or more dwelling units (per unit) .................... 7.50
Section 15- 28.06. Auctioneers ............................... 112.50
Section 15- 28.08. Billiard and Pool Rooms (per table) ................. 52.50
Section 15- 28.10. 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 four boarders ...... ............................... 21.00
For each person over four .... ............................... 4.50
Section 15- 28.12. Cleaning and Dyeing Laundry Delivery.
Vehicles (annual, per vehicle) . ............................... 168.00
The tax applies to those who have no fixed place of business in the Town.
Section 15- 28.14. Contractors (annual).
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 ...... ............................... 224.00
MGR035 A: \FEES \ORDINANC 3
Section 15- 28.15 Day Care Facilities.
Day Care Facilities provide day care for children under 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
Large Family Day Care Home - a facility providing day care for 7 to 12 children (including resident
children) ............. ............................... No Fee
Nursery School - a facility providing day care for 13 or more children ...... No Fee
Section 15- 28.16. Hospitals, Rest Homes, Etc
Annual, or ............. ............................... 140.00
Per bed, if that is larger ..... ............................... 10.00
Section 15- 28.18. Hotels and Motels (annual, per guest room) ............ 7.50
Business activities other than renting rooms, conducted in connection with a hotel, are taxed
separately.
Section 15- 28.20. House Movers.
Annual license .......... ............................... 105.00
Additional per structure moved ............................... 84.00
Section 15- 28.22. Itinerant Photographers (annual) ................... 210.00
Section 15- 28.24. Itinerant Vendors (daily) ........................ 105.00
The works "itinerant vendor" mean any person, both principal and agent, who engages in
a temporary and transient business n 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
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 relived
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.
Section 15- 28.28. Junk Dealers (annual) ......................... 420.00
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 rages, sacks, bottles, cans, papers, metals or other articles of junk.
MGR035 A: \FEES \ORDINANC 4
Section 15- 28.30. Junk Collectors (annual, per vehicle) .................... 84.00
Junk collector" means any person who has not fixed place of business in the Town and
who engages in or caries on the business of collecting, buying or selling any old rags,
sacks, bottles, cans, papers, metals or other articles of junk.
Section 15- 28.36. Peddlers.
Peddlers of wares other than food, per person:
Daily.............................. ..........................21.00
Peddlers of food, except lunch wagon operators:
Using a vehicle, per vehicle, annual ... ............................... 210.00
Not using a vehicle, carrying wares by hand ............................ 42.00
Lunch wagon operators (per vehicle, annual) ........................... 210.00
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 15-
5 of this chapter shall pay a license tax of seven dollars and fifty cents per day. This rule
applies only when all fees, commissions or other renumeration 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.
Daily.............................. ...........................7.50
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 his possession.
Section 15- 28.38. Professional and Semiprofessional Occupations.
Per professional or semiprofessional person ........................... 200.00
Additional per employee ............ ............................... 15.00
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
Dentist
Designer or decorator
MGR035 A: \FEES \QRDINANC 5
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
Masseuse or masseur
Oculist, optician or optometrist
Osteopath
Physician
Real estate brokers
Surgeon
Surveyor
Taxidermist
Veterinarian
X -ray, dental or medical laboratory
Section 15- 28.40. Service Occupations .......................... 100.00
Service occupations" means appliance, home furnishing or radio and television installation,
maintenance and repair, janitorial and building maintenance, or landscape installation and
maintenance.
Section 15- 28.42. Shooting Galleries ........................... 105.00
Section 15- 28.44. Solicitors (per business) ........................ 210.00
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.
Section 15- 28.46. Taxicabs.
Per business ........... ............................... 150.00
Additional per taxi ........ ............................... 22.50
Section 15- 28.48. Theaters and Concert Halls ...................... 105.00
Section 15- 28.50. Trucking (annual)
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 Town, per vehicle ............... 140.00
MGR035 A: \FEES \ORDINANC 6
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
For each additional vehicle .. ............................... 22.50
Section 15 -29. Credit for Businesses in Business Improvement Area
a. Any business located and operating within a parking and business improvement area
established pursuant to Streets and Highways Code §§ 36500 et ee . shall receive a credit on the
annual license tax as set forth in this section.
b. Each person doing any of the kinds of business specified in subdivisions 15- 28.14, 15-
28.16, 15- 28.38, 15- 28.40, and 15 -28.50 shall receive a credit equal to 50% (one -half) of the annual
business license tax.
c. Every person doing any other kind of business shall receive a credit equal to 33 -1/3%
one- third) of the annual business license tax.
SECTION III
Any judicial action or proceeding to attack, review, set aside, void or annul this ordinance shall be
commenced within 120 days after adoption of this ordinance.
SECTION IV
A. This ordinance shall take effect July 1, 1991. Within 15 days after this ordinance is adopted
the Town Clerk shall cause it to be published once in a newspaper of general circulation
published and circulated in the Town.
B. In establishing the effective date, the Town Council finds that this ordinance relates to taxes
for the usual and current expenses of the Town within the meaning of Government Code
Section 36937, and must be effective July 1, 1991, so that business license fees will be paid
at higher rates commencing with the beginning of the 1991 -92 fiscal year.
This ordinance was introduced at a regular meeting of the Town Council of the Town of Los Gatos
on May 28, 1991 and adopted by the following vote as an ordinance of the Town of Los Gatos at a eeting
of the Town Council of the Town of Los Gatos on June 3, 1991. d
COUNCIL MEMBERS:
AYES: Joanne Benjamin, Randy Attaway, Eric D. Carlson, Steven Blanton
NAYS: None
ABSENT: Mayor Brent N. Ventura
ABSTAIN:
SIGNED:
VICE- MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK OF THE TOWN OF LOS , d OS
LOS GATOS, CALIFORNIA
MGR035 A: \FEES \ORDINANC