TO: LINDA REICH, CITY MANAGER
FROM: KIM SAO, DIRECTOR OF FINANCE
SUBJECT
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Business License Tax Study and Recommendation.
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RECOMMENDATION
recommendation
Staff recommends that the City Council review the Business License Tax Study and offer direction regarding whether to focus on the Single Gross Receipts Model or the Variable Gross Receipts Model for modernizing the City's business license tax structure. Based on Council's input, staff will explore the feasibility of including the Business License Tax on the November 2026 General Municipal Election ballot.
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FISCAL IMPACT
Updating the City's business license tax structure could produce materially different revenue outcomes depending on the model selected. Under the City's current 1987 framework, annual business license revenues total approximately $1.098 million based on the City's existing business license tax structure.
The Single Gross Receipts Model applies one uniform gross-receipts tax rate to all taxable businesses while maintaining a $25 minimum tax for businesses reporting up to $25,000 in gross receipts. Based on total taxable gross receipts of $9.40 billion across 4,656 licensed businesses, estimated revenues under this model could range from $3.634 million to $11.773 million annually, depending on the rate selected.
The Variable Gross Receipts Model applies tiered rates across five business categories: Contractor, General/Retail, Property Rental, Professional, and Services, while retaining an exempt category and a $25 minimum tax. When these tiered rates are applied to the City's business profile of 4,656 businesses and $9.40 billion in estimated taxable receipts, the model generates an estimated $5.893 million in annual revenue. This represents an increase of $4.795 million over the current 1987 framework. The model aligns tax obligations with business activity type and captures revenue proportionate to economic scale.
Both proposed models are estimated to substantially outpe...
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