Council says property owners don't need a business license
By Nathan R. Huff
Arguing that auditors don't always know best, the town council rescinded the recent extension of the business license requirement to commercial property owners. At the Sept. 5 meeting, council members agreed the business license language in the town code was open to interpretation, but unanimously rejected the idea that leasing commercial property qualified as operating a business.
Approximately $15,000 in license fees--an average of $150 per business--will be refunded by the town. Letters will be sent to the remaining commercial property holders stating a license will not be required. Had the town pursued the requirement, an additional $85,000 a year would have found its way into the town coffers.
While council members admitted the town would love the extra cash, they said the decision was something the council needed to evaluate. "This is a policy area that this body does have and should have control over," Mayor Steve Blanton said.
Councilman Joe Pirzynski said he was troubled by the lack of notification to council members. "We should have had this discussion a while back before this decision was made," Pirzynski said. "I hate to be sitting there when the phone call comes saying 'what is going on?'"
The finance department several weeks ago began notifying commercial property landlords that they qualified as a business under the town ordinance and needed to apply for a business license. While town code states anyone who carries on "any business, trade, profession, calling or occupation ... for profit or livelihood" must have a town business license, landlords have never been required to acquire licenses--until now.
According to business license administrator Stephanie Gutowski, rent-collecting property owners had just slipped through the cracks of the town code. To date, the town has successfully required licenses for all hair stylists/manicurists, lawn care and pool maintenance services, professionals and massage therapists.
The most recent previously unlicensed target--commercial landlords--appeared on the council's agenda after the town received 25 phone calls and five visitors who questioned the legality of the move by the finance department. Town attorney Orry Korb assured the council that the licensing requirement was consistent with the town code, and interim city manager Les White said other cities had similar policies.
"What we view as a broader definition someone else might view as a new business license tax," White said.
Council members sided with the latter interpretation. Councilwoman Linda Lubeck said she feared that, by broadening the interpretation, other activities, such as trading stock from one's home computer, could require a license. Lubeck, a certified public accountant, added that collecting rent does not qualify as employment under Internal Revenue Service standards.
Staff deferred to council, promising to return the checks it had already received. Korb said he would research the issue and possibly bring back an amendment to the town code giving commercial landlords an exempt status, so as to eliminate any misinterpretation.
White, addressing the council, said that while staff had no problem reversing the policy, it was initiated with good intentions. "I do want to say, with respect to the business license staff, that they were doing their job," he said.
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Los Gatos, California Since 1881
