East Palo Alto Municipal Code Ch. 5.08 Business Taxes

A. Every person primarily engaged in the business of selling any goods, wares or merchandise at retail, and not otherwise specifically taxed by other provisions of this chapter, shall be classified within the category of retail trade and pay an annual license fee for each one thousand dollars ($1,000.00) of gross receipts as provided in the fee schedule established by the city. Public utilities shall also be classified within the category of retail trade.

B. For the purpose of this section, a "retail sale" or sale at retail means a sale of goods, wares or merchandise for any purpose other than resale in the regular course of business.

C. Persons engaging in retail trade and other business activities taxed on the basis of gross receipts under different rates, as provided by this chapter, may elect to combine gross receipts at one rate and obtain one license if the provisions of Section 5.08.180 apply to the combined activities.

(Prior code § 3-1.201)

A. Every person primarily engaged in business as a grocer shall be classified within the grocer category and pay a license fee for each one thousand dollars ($1,000.00) of gross receipts as provided in the fee schedule established by the city.

B. "Grocer" means and includes any business in which the principal activity of the business consists of the retail or wholesale sale of food stuffs intended for human consumption, but does not include restaurants or any other businesses where food products are prepared on the premises for immediate consumption.

C. Persons engaging in grocery sales and other business activities taxed on the basis of gross receipts under different rates, as provided by this chapter, may elect to combine gross receipts at one rate and obtain one license if the provisions of Section 5.08.180 apply to the combined activities.

(Prior code § 3-1.202)

A. Every person engaged in the business of selling new or used motor vehicles at retail shall pay a license fee for each one thousand dollars ($1,000.00) of gross receipts as provided in the fee schedule established by the city.

B. For the purpose of this section, "a wholesale sale" or "sale at wholesale" means a sale of goods, wares or merchandise for the purpose of resale in the regular course of business.

C. Persons engaging in wholesale sales and other business activities taxed on the basis of gross receipts under different rates, as provided by this chapter, may elect to combine gross receipts at one rate and obtain one license, if the provisions of Section 5.08.180 apply to the combined activities.

(Prior code § 3-1.203)

Nothing in Sections 5.08.020 through 5.08.030 shall be construed to require the inclusion, in the computation of the amount of the license fee due thereunder, of the gross receipts of the sales of goods which are shipped by the seller to points outside of the state.

(Prior code § 3-1.205)

A. Every person primarily engaged in the business of providing business, personal or repair services, or social services, or transportation services, as defined in the current U.S. Government Printing Office publication Standard Industrial Classification Manual, not specifically taxed by other provisions of this chapter, shall be classified within the license fee for each one thousand dollars ($1,000.00) of gross receipts for services performed within the city as provided in the fee schedule established by the city.

B. Person engaging in business, personal and repair services and other business activities taxed on the basis of gross receipts under different rates, as provided by this chapter, may elect to combine gross receipts at one rate and obtain one license, if the provisions of Section 5.08.180 apply to the combined activities.

(Prior code § 3-1.206)

Every person primarily engaged in any business defined in this section (or any combination of such businesses), and classified as professional or semiprofessional, shall pay an annual license fee for each one thousand dollars ($1,000.00) of gross receipts for services performed within the city as provided in a fee schedule established by the city.

A. Finance, Insurance and Real Estate. Every person in any business, profession or occupation within the business fields of finance, insurance and real estate, as described in the current U.S. Government Printing Office publication Standard Industrial Classification Manual, except for those persons whose business is primarily renting real property, as defined in Section 5.08.120, shall be classified as professional-semiprofessional.

B. Health, Veterinary, Legal, Education, Engineering-Architectural-Surveying, Accounting-Auditing-Bookkeeping, and Miscellaneous Services Not Classified Elsewhere. Every person in any business, profession or occupation within the business fields of health, veterinary, legal, education, engineering-architectural-surveying, accounting-auditing-booking and miscellaneous services not classified elsewhere, as described in the current U.S. Government Printing Office publication Standard Industrial Classification Manual shall be classified as professional-semi-professional.

C. Nothing contained in this section shall be deemed or construed as applying to any person engaged in any of the professions or occupations enumerated in this section solely as an employee or partner of any other person or entity conducting, managing or carrying on any such business in the city.

D. Any persons subject to a license under provisions of this section may exclude from gross receipts the portion of those receipts paid to subcontractors, providing that a list of such subcontractors, and the amounts of payment are reported to the director of finance.

E. Persons engaging in professional and semiprofessional connected business and other business activities taxed on the basis of gross receipts under different rates, as provided by this chapter, may elect to combine gross receipts at one rate and obtain one license, if the provisions of Section 5.08.180 apply to the combined activities.

(Prior code § 3-1.207)

A. Every person primarily engaged in the business of providing entertainment, recreation or amusement, and not otherwise specifically taxed by other provisions of this chapter, shall be classified recreation and entertainment and pay an annual license fee for each one thousand dollars ($1,000.00) of gross receipts as provided in the fee schedule established by the city.

B. The business of providing entertainment, recreation or amusement includes, but is not limited to, the following: Theatrical or musical entertainment; all shows or exhibits; exhibiting motion pictures, films; nonprofessional sports and athletic exhibition or contest; pool or billiard room; bowling allies; golf course; circus, penny arcade, carnivals, menageries; charter boats, sport-fishing.

C. Persons engaging in recreation and entertainment businesses and other business activities taxed on the basis of gross receipts under different rates, as provided by this chapter, may elect to combine gross receipts at one race and obtain one license, if the provisions of Section 5.08.180 apply to the combined activities.

(Prior code § 3-1.208)

As used in this chapter, "professional sports events" means any sporting activity held at any place in the city wherein the participants are paid or compensated for their sporting services whether in cash, securities or otherwise, and regardless of the amount of such services. This definition does not include athletes or students participating in athletic events, wherein such athletes or students received scholarships, grant-in-aid, or similar financial support for educational purposes.

B. Every person commencing, transacting or carrying on any professional sports event in the city shall pay a daily license tax of ten percent of gross receipts measured as of the time or times such event or events as to which this tax is applicable may commence, be transacted or be carried on in the city.

(Prior code § 3-1.209)

A. Every person primarily conducting or carrying on a business who is licensed as a contractor by the state and who undertakes to, or offers to undertake to, or purports to have the capacity to undertake to, or submits bids to, or does personally or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or other structures or works in connection therewith, is defined as a contractor. "Contractor" as used in this section, also includes subcontractor and specialty contractor, whether operating within the city or from outside the city with no fixed place of business in the city. A contractor shall pay an annual license fee as provided in the fee schedule established by the city for each one thousand dollars ($1,000.00) of gross receipts for work engaged in at sites within the city.

B. Any person subject to a license under provisions of this section may exclude from gross receipts the portion of those receipts paid to subcontractors, providing that a list of such subcontractors and the amounts of payment is reported to the finance department.

C. Persons engaging in construction contracting and other business activities taxed on the basis of gross receipts under different rates, as provided by this chapter, may elect to combine gross receipts at one rate and obtain one license, if the provisions of Section 5.08.180 apply to the combined activities.

(Prior code § 3-1.210)

A. Every person primarily engaged in the business of manufacturing or processing any goods, wares, merchandise, food, articles, substances or commodities at a fixed place of business within the city shall be classified manufacturing and pay an annual license fee as provided for in the fee schedule as established by the city for each one thousand dollars ($1,000.00) of gross receipts, less the value of raw materials (including the cost of energy resource) or the value of the partially completed product at the time it enters the manufacturing process within the city.

B. Whenever:

1. There are no gross receipts because the manufacturing process within the city does not result in a finished product;

2. It is shown to the satisfaction of the finance department that the licensee's present method of accounting, using generally accepted principles of accounting consistently applied, does not permit it to determine gross receipts;

3. The costs of raw material cannot be determined; or

4. The final product consists principally of raw materials or component parts manufactured elsewhere by the licensee; the following alternative method of calculating gross receipts under this section shall be used: The total of all expenses incurred in the manufacturing process at the business location within the city for payroll, utilities, rent and depreciation.

C. A business taxed under this section shall not be considered either a retailer or wholesaler with respect to the sale of goods manufactured by such business within the city.

D. Persons engaging in manufacturing and other business activities taxed on gross receipts under different rates, as provided by this chapter, may elect to combine gross receipts at one rate and obtain one license if the provisions of Section 5.08.180 of this Code apply to the combined activities.

(Prior code § 3-1.211)

A. Every person conducting or carrying on the operation of an administrative headquarters shall be classified administrative headquarters and pay a license fee as provided in the fee schedule established by the city for each one thousand dollars ($1,000.00) of gross payroll of all persons employed by the business at such administrative headquarters.

B. "Administrative headquarters" means a location where the principal business transacted consists of providing administrative or management-related services, such as but not limited to, record-keeping, data processing, research, advertising, public relations, personnel administration, legal and corporate headquarters services, to other locations where the operations of the same business are conducted which could lead more directly to the product of gross receipts.

C. A business shall be taxed as an administrative headquarters if the number of employees engaged in managing the business activities exceeds the total number of employees engaged in activities at the same location which would be otherwise taxable under this chapter. The gross payroll on which the license fee is to be computed shall include those employees engaged in those activities otherwise taxable under this chapter.

D. "Gross payroll" means and includes the total gross amount of all salaries, wages, commissions, bonuses or other money payment of any kind which a person received from or is entitled to receive from or be given credit for by his employer for any work done or personal service rendered in East Palo Alto, from any trade, occupation or profession, including any kind of deductions before take home pay is received; but does not mean or include amounts paid to traveling salespersons or other workers as allowance or reimbursement for traveling or other expenses incurred in the business of the employer, except to the extent of the excess of such amounts over such expenses actually incurred and accounted for by the employee to the employer.

(Prior code § 3-1.212)

Every person or entity engaged in the business of renting or letting a building, structure or other property, or a portion of such building, structure or property, within the city for any purpose, including residential rentals except for those paying the tax imposed under Section 5.08.125, shall pay an annual license fee as provided in the fee schedule established by the city.

(Prior code § 3-1.213; Ord. No. 404, § 2, 7-5-2016; Ord. No. 06-2022, § 2, 11-8-2022)

A. This section shall govern the taxation of gross receipts from the rental of residential units in the City of East Palo Alto.

B. Every person or entity engaged, including through an interest in another entity, in the business of renting or leasing dwelling units in the City of East Palo Alto shall pay an annual tax of two and one-half percent (2.5%) of gross receipts.

C. Gross receipts from the following categories of dwelling units shall not be subject to this section, but shall be subject to Section 5.08.120:

1. Dwelling units owned by a nonprofit corporation renting affordable housing;

2. Dwelling units whose rents are controlled under state or federal law, deed restrictions, or agreements with public agencies, at rental rates that are affordable to households earning no more than eighty percent (80%) of AMI and whose tenants must be income-qualified;

3. Units occupied by tenants receiving monthly rental assistance (such as Section 8 vouchers or shelter + care) from the County of San Mateo Department of Housing;

4. Any dwelling unit during the first three years after the issuance of a certificate of occupancy;

5. An individual room without kitchen facilities rented in a residential dwelling unit; and

6. An accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU) as defined in Section 18.96.020.

D. Any person or entity otherwise subject to the tax imposed under this section may seek a one-year hardship exemption due to exceptional circumstances. The rent stabilization administrator may approve such applications for good cause, such good cause being determined in accordance with standards set out in the City Rent Stabilization and Just Cause for Eviction Ordinance, Chapter 14.04 of the East Palo Alto Municipal Code. Such approvals shall be in writing and specifically state the factors that constitute good cause. Any hardship exemption shall be effective for one tax year only, after which it will expire. Taxpayers who seek hardship exemptions must reapply every year.

E. The city council may reduce the tax rate set forth in this section and may terminate any such reductions without further voter approval.

F. The tax imposed by this chapter shall not be passed on to tenants in the form of rent increases or in any manner, including reduction in services or added charges for services, unless such pass-through is constitutionally required. Any violation of this provision shall be a defense for a tenant in an unlawful detainer action. A violation of this provision shall be enforceable by an affected tenant.

G. The city council may use the funds generated for any purposes deemed necessary and appropriate for the benefit of the residents of East Palo Alto. Periodically, council shall review housing policy, housing programs, and related issues to determine how and to what extent the city should establish and fund such programs, if any, to increase the supply of affordable housing and protect residents from displacement and homelessness, including the provision of rental assistance, in light of the city's budget cycle and other relevant funding cycles.

(Ord. No. 404, § 2, 7-5-2016; Ord. No. 06-2022, § 3, 11-8-2022)

Every person engaged in the business of soliciting or peddling any goods, wares, merchandise or other things of value, not otherwise specifically licensed by this chapter or any ordinance of the city, shall pay a license fee annually as provided in the fee schedule established by the city.

A. For the purpose of this chapter, "peddling" means going from house to house, place to place, or in or along the streets, within the city, selling and making immediate delivery of, or offering for sale and immediate delivery, any goods, wares, merchandise or anything of value, in possession of the peddler, but does not include selling and delivering, and offering to sell and deliver, items of foods and drink for immediate human consumption by a vendor to regular customers along established routes where such sales and deliveries and offers of sale and delivery are made only to such regular customers on the premises of their place of residence or their place of employment or business, in accordance with invitations previously made to such vendor to make regular calls at specific intervals at such premises for the purpose of making sales and deliveries of such items of food and drink for immediate human consumption.

B. For the purpose of this chapter, "solicitor" means any person who engages in the business of going from house to house, place to place, or in or along the streets within the city selling or taking orders for, or offering to sell or take orders for, goods, wares, merchandise or other things of value for future delivery, or for services to be performed in the future.

C. This section does not include peddlers of personally manufactured articles or produce specifically licensed in Section 5.08.140.

(Prior code § 3-1.214)

Every person engaged in a business as "peddler and solicitor, personally manufactured articles or produce shall pay a license fee according to the schedule as established by the city. "Peddler or solicitor" means a person who peddles or solicits anything which he/she has personally manufactured or produced, and includes, but is not limited to, any farmer, poultryman or horticulturist soliciting or peddling his/her own produce. This term is limited to natural persons and includes the farmer, poultryman or horticulturist, members of his/her immediate family, or an employee who is regularly engaged in assisting in the production of the produce.

(Prior code § 3-1.215)

Every person primarily conducting, managing or carrying on the business of distributing handbills, advertising, samples, dodgers, advertising matter or printed matter of any kind shall pay a license fee annually, as provided in the fee schedule established by the city.

(Prior code § 3-1.216)

Every person, business, company or corporation operating an off-site, multi-user hazardous waste treatment facility located within the City of East Palo shall pay the business license fee prescribed for such facility in the fee schedule. Each such facility shall pay the prescribed fee or tax on annual gross receipts for the treatment, storage, recycling or disposal of hazardous waste at the facility.

(Ord. No. 291, § 1, 4-19-2005)

Any person engaged in a business not specifically taxed by other provisions of this chapter and not otherwise exempted shall pay an annual license fee as provided in the fee schedule established by the city for each one thousand dollars ($1,000.00) of gross payroll.

(Prior code § 3-1.217)

Whenever a person is engaged in two or more business activities, except rental of real property, which are taxed on the basis of gross receipts under different rate provisions of this chapter such person may elect to combine all such gross receipts and pay a tax determined by applying the rate of tax applicable to that business activity producing the greatest amount of gross receipts, subject to the following provisions:

A. Both businesses are conducted at the same location.

B. Business activities to be included in the gross receipts, as provided by this section, shall not exceed twenty (20) percent of the total of the combined total gross receipts of the business.

(Prior code § 3-1.218)

Whenever there are included, within the gross receipts used to determine the license fee of a business under this chapter, amounts which reflect sales for which credit is allowed, and such amounts prove uncollectible in a subsequent year, those amounts may be excluded from gross receipts in the year they prove to be uncollectible; provided, however, if the whole or a portion of such amounts excluded uncollectible are subsequently collected, they shall be included in the amount of gross receipts for the period when they are recovered.

(Prior code § 3-1.219)

It shall be the duty of the director of finance, and he/she is directed, to enforce each and all of the provisions of this chapter. Each department of the city which issues permits for work to be done shall require the production of a valid unexpired license prior to the issuance of such a permit.

The director of finance, in the exercise of the duties imposed upon him/her under this chapter, and acting through deputies or duly authorized assistants, shall examine or cause to be examined all places of business in the city to ascertain whether the provisions of this chapter have been complied with.

The director of finance, and each and all of his/her assistants and any police officer, shall have the power and authority to enter, free of charge and at any reasonable time, any place of business required to be licensed in this chapter and demand an exhibition of its license certificate. Any person, having such license certificate heretofore issued in his/her possession or under his/her control, who willfully fails to exhibit the same on demand, shall be guilty of an infraction and subject to the penalties provided in this chapter. It shall be the duty of the director of finance and each of his/her assistants to cause a complaint to be filed against any and all persons found to be violating any of said provisions.

(Prior code § 3-1.220)

The conviction and punishment of any person for transacting any business without obtaining a license shall not excuse or exempt such person from the payment of any license tax due or unpaid at the time of such conviction, and nothing in this chapter shall prevent a criminal prosecution of any violation of the provisions of this chapter. All remedies prescribed under this chapter shall be cumulative and the use of one or more remedies by the city shall not bar the use of any other remedy for the purpose of enforcing the provisions of this chapter.

(Prior code § 3-1.221)

Each and every day or fractional part of a day that the trade, calling, business, profession or occupation specified in this chapter is conducted, carried on or engaged in, or the thing done, without a license as required by this chapter, shall constitute a violation of this chapter, and any person who violates any of the provisions of this chapter shall be deemed guilty of a misdemeanor. Arrest and conviction hereunder shall not be construed as a waiver of the right of the city to bring civil action, nor shall the bringing of such civil action release the defendant therein, or any other person, from such criminal prosecution.

(Prior code § 3-1.222)

Whenever the amount of any tax, penalty or interest has been paid more than once or has been erroneously or illegally collected or received by the city under this section, it may be refunded provided a verified claim in writing therefor, stating the specific grounds upon which such claim is founded, is filed with the finance department within three years from the date of payment. The claim shall be audited by the department of finance and shall be made in accordance with current city refund procedures. If that claim is approved, the refund may be refunded or may be credited on any amounts then due and payable from the person from whom it was collected or by whom paid, and the balance may be refunded to such person or to his/her administrators or executors.

(Prior code § 3-1.223)

A. Any person aggrieved by any decision of an administrative officer or agency with respect to the issuance of or refusal to issue a license, or the amount of a license tax, may appeal to the city manager by filing a notice of appeal with the city manager. An appeal may be taken by filing with the city manager or his/her designated representative a written statement setting forth in full the grounds of the appeal.

B. The city manager is authorized to issue such regulations as may be reasonable and necessary to hear and determine such appeals. Such regulations shall be in writing and available to any person so requesting them.

C. The amount of any license tax finally determined, as provided in this section or any other section of this chapter, shall be due and payable as of the date the original license fee was due and payable, together with any penalties that may be due thereon; provided, however, if the amount of such license tax is fixed in accordance with the original statement of the applicant, then no penalty shall attach by reason or any delinquency.

(Prior code § 3-1.224)

The provisions of this chapter shall not apply to any person, association or corporation, or to any property, as to whom or which it is beyond the power of the city council to impose the license fee provided in this chapter. If any sentence, clause, section or part of this chapter is found to be unconstitutional, illegal or invalid, such unconstitutionality, illegality or invalidity shall affect only such clause, sentence, section or part of this chapter and shall not affect or impair any of the remaining provisions, sentences, clause, sections, or other parts of this chapter. It is declared to be the intention of the city council that this chapter would have been adopted had such unconstitutional, illegal or invalid sentence, clause, section or part thereof not been included in this chapter.

(Prior code § 3-1.225)

When, by reason of the provisions of the Constitution of the United States or the Constitution of California, the license fee imposed by this chapter cannot be enforced without there being an apportionment according to the amount of business done in the city or in the state, as the case may be, the city manager and director of finance shall prepare and issue regulations with respect to apportionment and such regulations shall provide adequate notice.

(Prior code § 3-1.226)

The director of finance, or any authorized employee, is authorized to examine the books, papers, records of any person subject to this chapter for the purpose of verifying the accuracy of any return made or, if no return was made, to ascertain the license fees due under this chapter. Every licensee or supposed licensee is directed and required to furnish to the director of finance, or his/her duly authorized agent or employee, the means, facilities and opportunity for making such examination and investigations as are authorized by this section. The director is authorized to examine any person, under oath, for the purpose of verifying the accuracy of any return made, or, if no return was made, to ascertain the license fee due under this chapter, and for this purpose may compel the production of books, papers and records and the attendance of all persons before him/her, whether as parties or witnesses, whenever he/she believes such persons have knowledge of such matters.

The refusal of such examination by any employer or person subject to the license fees shall be deemed a violation of this chapter.

(Prior code § 3-1.227)

The director of finance may grant, to any person who, by reason of physical infirmity, unavoidable misfortune, or unavoidable poverty, merits exemption from any license fee required by any provision of this chapter, an exemption of one annual fee for the conduct of any one business licensed by any provisions of this chapter; provided, however, that when it appears to the satisfaction of the director of finance that the conditions which warranted an exemption under this section no longer exist, the director may revoke such exemption and the license issued.

(Prior code § 3-1.228)

The provisions of this chapter shall not require the payment of a license tax to conduct, manage or carry on any business, occupation or activity from any institution or organization which is conducted, managed or carried on wholly for the benefit of charitable purposes and from which profit or income is not derived, either directly or indirectly, by any employee, officer or director of the organization.

(Prior code § 3-1.229)

A. Nonprofit organizations, or corporations, or charitable organizations, other than those charitable organizations defined in Section 5.08.280 complying with the provisions of this section, shall be granted the nonprofit fee rate per one thousand dollars ($1,000.00) of gross receipts as provided in Section 5.04.020, and subject to the minimum fee provided in the fee schedule established by the city.

B. A "nonprofit organization, corporation or association" means a business organized or conducted for nonprofit purposes only, which has been granted a determination of exemption from both federal and state income tax.

C. Every organization, corporation or association seeking an exemption pursuant to this section shall submit an annual statement to the finance department setting forth such information as the department requires to determine eligibility for the exemption. The statement required by this subsection must be filed on or before February 1st of each year.

(Prior code § 3-1.230)