REPORT TO COUNCIL
SUBJECT
Title
Receive the Results of Public Outreach in Connection with the Study Issue to Evaluate Options for Revisions to the Sunnyvale Business License Tax (FIN 19-01); Discussion and Provide Direction Regarding a Potential Ballot Measure for the November 3, 2020 Election to Increase the Business License Tax by Removing the Employee and Rental Unit Caps on the Business License Tax
Report
BACKGROUND
In March 2019, City Council sponsored a study issue to evaluate options to revise the City's Business License Tax (FIN 19-01). The Business License Tax was first established in 1968, and the last major update was approved by voters in 2005. The current structure is based on the number of employees (including the owner) operating in Sunnyvale. A business with one employee (meaning only the owner is operating the business, there are no other employees) is taxed at $38.89 for the 2020 tax year. Businesses with two to five employees are taxed at $66.52. The tax amount increases progressively every five employees thereafter, with a maximum tax of $12,638.80 for businesses with 946 or more employees.
Additionally, businesses that provide three or more separate living or office units for rent pay the tax based on the number of rental units or the number of employees, whichever is greater. Rental properties with fewer than three units are not required to obtain a business license. The tax rates for rental properties are the same as for other businesses, but there is a lower maximum tax rate of $5,654.20 for properties with 421 or more rental units. The tax rates for the businesses and rental offices adjust each year based on the San Jose/San Francisco/Oakland Consumer Price Index.
As part of a longer term look at revenues to the General Fund, which started with Utility Users Tax and more recently resulted in an increase to Transient Occupancy Tax, staff contracted with HdL Companies (HdL) to analyze Sunnyvale's business license tax and provide recomm...
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