Belmont plans business license tax changes

At its May 10 meeting, the council supported bringing a more equitable structure for taxes to the small business community through an updated business license tax to address inequalities. The new tax structure is based on gross estimated receipts instead of the flat rate currently used, resulting in a smaller minimum tax number for businesses. The smallest minimum tax under the new policy is $15, while the old rate is $376. Business license tax revenue is used to pay for city services including roads, fire and police. All employers that conduct business in the city must obtain a business license and pay the applicable tax. The city has seen a shift from light manufacturing to global high-tech companies, with small businesses often paying more than larger ones.

The new option designates businesses into four classifications. Category 1 is for general business, like food sales, and constitutes around 200 businesses. Category two is for contractors and professional services, like landscaping and hair stylists, around 579 businesses. Category three is for business services like engineering, accounting, architecture and property rental and would include around 1,000 businesses. Category four is for cannabis businesses, and the city would tax it at a much higher rate. Businesses with gross receipts for the previous tax year of less than $10,000 are exempt. Category one has a tax rate of $1.50 per $1,000 of gross receipts, Category two is $2 per $1,000, Category three is at $3 per $1,000 and Category four up to $100 per $1,000. The city estimates the new structure would generate around $1.1 million to $1.5 million in revenue annually, compared to the current $1 million. Belmont staff have worked on updating the tax for the last three years, with the last previous update in 1990.

The city is also exploring increasing its transient occupancy tax, or TOT, from 12% to 14%. The increase would bring in an additional $700,000 annually to the city’s general fund. Before the pandemic, TOT revenue was about $4 million per year, with most coming from Belmont’s 10 hotels. TOT revenue in 2021 was about $1.3 million.

“We’ve made it clear to staff over all these months that we weren’t the highest TOT, but at the same time, we wanted to capture revenues we are losing, and I think going from the 12% to 14% is on the right track,” Mayor Julia Mates said.

Vice Mayor Tom McCune, who owns a business registered in Belmont, said many businesses no longer have an office location during COVID-19, which may affect revenue.

“A lot of small companies now don’t have the same fixed location. I reported my house as the venue of purposes for this tax,” McCune said.

The council directed staff to bring back a revised business license tax ordinance in July for council consideration. To increase the TOT from 12% to 14%, Belmont must pass an ordinance and put forward a ballot measure for a simple majority vote for approval.

curtis@smdailyjournal.com

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