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Business Tax & Registration
Ballot Measure Changes
Ballot Measure Changes
Modernization of the San José
business tax was approved by San José voters
on November 8, 2016 (
). The approved changes will take effect July 1, 2017.
The City’s business tax was first adopted in 1963, and the methodology for calculating the current business tax was first adopted in 1984. The current rates had not been increased since 1986, three decades ago. More than 65% of San José voters approved the modernization measure and new rates at the November 2016 election.
The adjustments to the business tax that will take effect on July 1, 2017, include:
Increasing the base tax
Increasing the incremental tax and making it more progressive
Increasing the cap (the maximum amount of the tax affecting large businesses)
Updating the application of the tax to more classes of businesses
Adding inflation-based adjustments for future tax rates
ONLINE REGISTRATION AND PAYMENT
Businesses are able to register and pay their business tax online. More information can be found on the "Make a Payment" page:
VOTER APPROVED CHANGES TO THE BUSINESS TAX
The charts on the Business Tax Rates page represent the structure of the current and voter-approved business tax rates effective July 1, 2017.
Addition of a Financial Hardship Exemption for Small Business Owners with Limited Household Income
San José currently allows for several exemptions for the payment of the current business tax. These are provided by federal or state law, and several exemptions are specific to San José. The largest number of exemptions in San José is for businesses that qualify as a “low-revenue generating” small business (or “financial hardship”).
Currently, the financial hardship business income threshold is based on the poverty level guidelines established by the U.S. Department of Health and Human Services. The HHS poverty level is currently set at $12,060. Since the cost of living in the Bay Area is greater than the national average, the City Council approved an income threshold at two times (2X) the annual level established by the HHS.
Based on this formula, the City’s current financial hardship exemption threshold based on the poverty level established by the HHS is $24,120. This hardship exemption is applied based on business income regardless of total household income.
As part of the modernization, San José voters approved adding an additional exemption category for small business owners with limited household incomes. A small business can be exempt where the adjusted gross income of the small business owner does not exceed four times (4X) the annual poverty level established by the HHS.
Based on the current HHS poverty level, this threshold would be based on a household income of $48,240. This exemption based on household adjusted gross income (IRS Form 1040, Line 37) will allow a more generous exemption for low income households, and it maintains the current financial hardship exemption program based on business income (IRS Form 1040, Line 12).
Extended Deadline to Register a New Residential Landlord Business -- Now December 15, 2017
New residential landlords of one or two rental units will now pay the San José business tax for the first time as of July 1, 2017. The City Council established a grace period until December 15, 2017, so that these residential landlords can apply for and secure a valid business tax certificate from the City and pay the business tax without incurring penalties and interest. If the payment of the business tax is made after December 15, 2017, then interest and penalties will accrue retroactive to July 1, 2017.
LINKS TO CITY COUNCIL AND COUNCIL COMMITTEE MEETINGS
Certification of November 8, 2016, election results, including Measure G (December 13, 2016)
Business tax implementation and public outreach plan (December 13, 2016):
San José residents Steven Hunt, Kathleen Krenek, and Scott Myers-Lipton on January 13, 2016, filed with the City Clerk a Notice of Intent to circulate a petition within the City of San José for the purpose of modernizing the business tax by replacing the current Business Tax with a tax based on gross receipts.
The Notice of Intent to Circulate
As required by California Elections Code Section 9203, on January 26, 2016, the City Attorney provided the
ballot title and summary
The Potential Gross Receipts Tax Ballot Initiative staff memo
, January 21, 2016, and discussed by the Council on February 2, 2016.
The Preliminary Analysis and Discussion of Citizen-Initiated Gross Receipts Tax Ballot Measure, and Options for Updating Current Business Tax memo
, dated February 26, 2016, and discussed with the City Council on March 8, 2016.
The Potential Business Tax Modernization Measure memo
dated June 9, 2016, and discussed with the City Council on June 21, 2016 including staff analysis.
The Potential Business Tax Modernization Measure memo dated July 20, 2016 and discussed with the City Council on August 2 and August 9, 2016 including staff analysis:
The summary of the July 2016 public opinion survey on the Proposed Business Tax Modernization Measure memo dated July 27, 2016, and discussed with the City Council on August 2 and August 9, 2016, including staff analysis:
The Mayor’s memo dated August 1, 2016, and discussed with the City Council on August 2 and August 9, 2016:
The Mayor’s memo
dated August 5, 2016, and discussed with the City Council on August 9, 2016, including ballot measure language.
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