Monterey’s new business license tax structure kicks in

August 15, 2017
Monterey, CA

By Carly Mayberry, Monterey Herald

Monterey >> Monterey recently changed the way it determines charges for business licenses and the revision has created some notable differences in the amount some Monterey business owners pay.

Monterey Finance Director Julie Porter noted that while some business owners will end up paying more, others will see amounts similar to previous years, while still others will pay less.

In November voters approved the ballot measure amending the business license tax fee structure. The updated revised tax eliminates the classification of businesses and charges all businesses the same rates based on gross receipts. That’s a change from the previous fee structure that prior to April 1, charged one of 14 different tax rates based on the type of business, as defined by city code.

Now, businesses with gross receipts of $25,000 or less per calendar year, pay $26 and businesses with gross receipts in excess of $25,000 per year pay $26 plus 0.15 percent of their gross receipts. Previously, several individual businesses each earning $500,000 in gross receipts annually, paid between the tax rates of $642 and $1,197 (based upon their classification). Now, they will all pay $738.

“The previous city code was very complex and very outdated as far as business license structure goes,” said Porter, noting the previous 14 different tax rates and 170 different types of business classifications. “Now, the current structure is fixed and the same for every business.”

The overall intent, according to Porter, was not only for the total city tax that’s collected to stay close to the same but to make the system easier and in line with what many other cities base their business license taxes on.

While Porter cited Marina as one Peninsula city where the business license tax just increased, she also noted Pacific Grove, Carmel and Salinas as cities with similar business license tax structures to Monterey’s new structure.

Porter said a mailer went out in May to all city businesses notifying them of the change in business license tax fees that are effective from July to June each year. The final deadline for renewal is Aug. 15.

“Our ultimate goal was to simplify and make it easier to understand and implement,” said Porter, noting that she didn’t foresee much of an overall change in revenue for the city itself.

“We really anticipate the tax collected to be the same. The whole goal was to just simplify the whole structure.”

This last year, the city earned $3.4 million from the business license tax, which Porter said was a 2 percent increase from the last fiscal year. Revenue earned goes into the city’s General Fund to support public safety and for the maintenance of streets and roads.

“It’s an extra burden – nobody likes to pay more taxes but it sort of is what it is,” said Mike Zimmerman, chief operating officer for the Cannery Row Company.

In Zimmerman’s estimation, the rate for Cannery Row Company looks to have gone up 20 to 25 percent.

Conversely, for those like Monterey architect George Ash, fees seem less this time around.

“I don’t remember the numbers – I just paid it a couple weeks ago – but it was about half the previous amount,” said Ash.

That fit with Porter’s explanation that accountants, auditors, architects and doctors were those likely to see a lower rate while hoteliers, pest control and furniture business owners would most likely have to pay more in business license tax fees.

Chris Shake, owner of the Old Fisherman’s Grotto said his local businesses really have not been affected.

“A lot of times the city ... they’re not thinking about the state fees we have to pay,” said Shake. “Fortunately for the wharf businesses and the hospitality industry there’s not an effect from the business license tax fee changes, which is great news for us because we’re over regulated anyway. Fortunately, the businesses at the wharf have not been affected.”

Carly Mayberry can be reached at 831-726-4363.