Like many other county residents, Belmont voters will vote this November on whether to update its business license tax, which would increase the rate for larger firms but likely decrease the amount owed for small establishments.
Under the current model, businesses could fall into one of more than 20 categories, which then determines its effective tax rate, and would have a base tax of about $340 each year. That means the tax burden typically falls more heavily on craft business owners, who tend to make less than $125,000, compared to other categories, such as restaurants and doctors’ offices, city staff said.
The new model would consolidate and simplify the number of business categories — from more than 20 to four categories — ranging from restaurants to professional services, such as technology firms. The rate would follow a gross receipts model where businesses would pay 40 cents to $1 per $1,000 of their total receipts revenue depending on the type of establishment, although cannabis operations would pay $100 per $1,000. It would also reduce the base rate to $25, which businesses would be exempt if their receipts are less than $10,000.
According to a recent staff report, more than 60% of businesses would see reductions in rates, although larger firms would likely see increases.
“What we were really after was creating a model that would have us be revenue neutral, and we adjusted numbers up and down to make that so,” Councilmember Robin Pang-Maganaris said. “We were very thoughtful in considering businesses that have higher overhead and making this model more appropriate for them given their high cost to run their business.”
Updating the BLT revenue stream has been a frequent topic of discussion among several Peninsula cities as of late — including Foster City, Belmont and Redwood City — especially as budget deficits abound and other income sources, such as property-tax-in-lieu-of-vehicle license fees, were recently put in a precarious position. About $1.2 million is typically generated annually from the business license tax, about 4% of the general fund revenue.
“Anytime you propose changing a license or tax hike, some people will benefit and some will not. I think the thing that is fundamentally not very good about the format we’ve had for a long time is that it makes those small companies pay a fairly large percentage of their revenue,” Councilmember Tom McCune said. “The right thing to do for the city is to encourage smaller businesses that will hopefully grow into bigger businesses.”
