Chapter 4.72

TRANSIENT OCCUPANCY TAX*

Sections:

*State law reference— For statutory provisions authorizing cities to levy a transient occupancy tax, see Rev. and Tax. Code § 7281.

For the purpose of this chapter, the following words have the meanings set forth in this section:

• A. "City" means the City of San José.

• B. "Director of finance" means the director of finance of the city.

• C. "Hotel" means any structure situated in the city, including, but not limited to, any hotel, inn, tourist home or house, motel, studio hotel, bachelor hotel, guesthouse,

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bed and breakfast inn, apartment house, dormitory, public or private club, mobilehome or house trailer at a fixed location, or other similar structure or portion thereof situated in the city, which is occupied or intended or designed for occupancy by transients for dwelling, lodging or sleeping purposes.

• D. "Occupancy" means the use or possession or the right to the use or possession of any room or rooms, or portion thereof, in any hotel for dwelling, lodging or sleeping purposes.

• E. "Operator" means the person who is proprietor of the hotel, whether in the capacity of owner, lessee, sublessee, mortgagee in possession, licensee, or any other capacity. Where the operator performs his or her functions through a managing agent of any type or character, the managing agent shall also be deemed an operator for the purposes of this chapter, and shall have the same duties and liabilities as his or her principal. Compliance with the provisions of this chapter by either the principal or the managing agent shall, however, be considered to be compliance by both.

• F. "Person" means any individual, firm, partnership, joint venture, association, social club, fraternal organization, joint stock company, corporation, estate, trust, business trust, receiver, trustee, syndicate, or any other group or combination acting as a unit.

• G. "Rent" means the consideration charged for the occupancy of space in a hotel valued in money, whether to be received in money, goods, property, labor, service, or otherwise.

• H. "Transient" means a person who exercises occupancy or is entitled to occupancy by reason of concession, permit, right of access, license, or other agree-

ment for a period of thirty consecutive calendar days or less, counting portions of calendar days as full days.

(Prior code § 13001; Ords. 22227, 22631, 29145.)

• A. No tax shall be imposed upon:

  1. Any federal or state officer or employee when on official business;

  2. Any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty.

• B. No exemption shall be granted except upon a claim therefor made at the time rent is collected, and under penalty of perjury, upon a form prescribed by the director of finance.

• (Prior code § 13003.)

For the privilege of occupancy in any hotel, each transient is subject to and shall pay a tax in the amount of six percent of the rent charged by the operator. Said tax constitutes a debt owed by the transient to the city which is extinguished only by payment to the operator or to the city. The transient shall pay the tax to the operator of the hotel at the time the rent is paid. If the rent is paid in installments, a proportionate share of the tax shall be paid with each installment. The unpaid tax shall be due upon the transient's ceasing occupancy in the hotel. If for any reason the tax due is not paid to the operator of the hotel, the director of finance may require that such tax shall be paid directly to the director of finance.

(Prior code § 13002.)

Each operator shall collect the tax imposed by this chapter to the same extent and at the same time as the rent is collected from every transient. The amount of tax shall be separately stated from the amount of the rent charged. No operator of a hotel shall advertise or state in any manner, whether directly or indirectly, that the tax or any part thereof

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will be assumed or absorbed by the operator, or that it will not be added to the rent, or that, if added, any part will be refunded except in the manner hereinafter provided. Each operator shall hold in trust for the account of the city until payment is made to the city the amounts collected as taxes pursuant to this chapter.

(Prior code § 13004; Ord. 29145.)

• A. All of the taxes collected under this chapter shall, subject to the provisions hereinafter set forth, be expended for the following:

  1. Funding of a convention and visitors bureau for the City of San José, including a rental subsidy of city facilities for convention purposes.

  2. Funding of the cultural grant program and fine arts division programs, including:

     • a. Funding of cultural grants, including the San José Symphony and the San José Museum of Art, and a rental subsidy for cultural use of city facilities; and

     • b. Funding the expenses of the fine arts division of the convention and cultural department, including but not limited to personal, nonpersonal, and equipment expenses, fringe benefits, and overhead.

  3. Funding of the city's operating subsidy to the convention and cultural facilities of the City of San José.

• B. The amount of moneys currently allocated to activities described in subparagraphs Al and 2 shall serve as the base year funding for purposes of calculating the amounts set forth in this paragraph. In subsequent fiscal years, beginning in 1981-82, the amount of tax receipts used to fund the activities described in subparagraphs Al and 2 herein, shall be the base-year funding plus fifty percent of the dollar in-

  • crease in tax receipts over the base-year tax receipts, with a limit of twelve percent per annum increase over the funding of any previous year. Available funds shall be apportioned between the activities described in subparagraphs Al and 2 according to the annual decision of the city council. The remaining fifty percent plus any additional amount above the twelve percent limitation shall be used for the funding of the activity described in subparagraph A3. In the event of a decrease of revenues, the decrease will be apportioned on the same 50-50 basis, fifty percent to the activities described in subparagraphs Al and 2 in a proportion to be decided by the city council, and fifty percent to be the activities described in subparagraph A3. In the event of a decrease of revenues, the decrease will be apportioned on the same 50-50 basis, fifty percent to the activities described in subparagraphs Al and 2 in a proportion to be decided by the city council, and fifty percent to be the activities described in subparagraph A3.

• C. All the taxes collected under this chapter shall be placed in the transient occupancy tax special fund established by Part 34 of Chapter 4.80 of the San José Municipal Code, and used for the purposes and in the manner set forth in this section. The director of finance shall establish and keep such accounts as may be necessary to account for said taxes.

• (Ords. 20553, 21015.)

• A. Notwithstanding Section 4.72.060, commencing July 1, 1990, the city council shall expend monies as hereinafter provided.

• B. All of the taxes collected under this chapter shall, subject to the provisions hereinafter set forth, be expended for the following:

  1. Funding of a convention and visitors bureau for the City of San José, including a rental subsidy of city facilities for convention purposes.

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2. Funding of the cultural grant program and fine arts divisions programs, including:

   • a. Funding of cultural grants, including the San José Symphony and the San José Museum of Art, and a rental subsidy for cultural use of city facilities; and

   • b. Funding the expenses of the fine arts division of the convention and cultural department, including but not limited to personal, nonpersonal, and equipment expenses, fringe benefits, and overhead.

3. Funding of the city's operating subsidy to the convention and cultural facilities of the City of San José.

• C. The amount of moneys currently allocated to activities described in Subparagraphs B.1. and 2. shall serve as the base year funding for purposes of calculating the amounts set forth in this paragraph. In subsequent fiscal years, beginning in 1981-82, the amount of tax receipts used to fund the activities described in Subparagraphs B.1. and 2. herein, shall be the base year funding plus fifty percent of the dollar increase in tax receipts over the baseyear tax receipts. Available funds shall be apportioned between the activities described in Subparagraphs B.1. and 2. according to the annual decision of the city council. The remaining fifty percent shall be used for the funding of the activity described in Paragraph B.3. In the event of a decrease of revenues, the decrease will be apportioned on the same 50-50 basis, fifty percent to the activities described in Subparagraphs B.1. and 2. in a proportion to be decided by the city council, and fifty percent to be the activities described in Subparagraph B.3.

• D. All the taxes collected under this chapter shall be placed in the transient occupancy tax special fund established by Part 34 of Chapter 4.80 of the San José Municipal Code, and

used for the purposes and in the manner set forth in this section. The director of finance shall establish and keep such accounts as may be necessary to account for said taxes. (Ord. 23481.)

Within thirty days after the operative date of this chapter, or within thirty days after commencing business, whichever is later, each operator of any hotel renting occupancy to transients shall register said hotel with the director of finance and obtain from him a occupancy registration certificate be at all times posted in a conspicuous on the premises. Said certificate shall, other things, state the following:

• A. The name of the operator;

• B. The address of the hotel;

• C. The date upon which the certificate was issued;

• D. "This 'Transient Occupancy Registration Certificate' signifies that the person named on the face hereof has fulfilled the requirements of the Transient Occupancy Tax Ordinance of the City of San José by registering with the Director of Finance for the purpose of collecting from transients the Transient Occupancy Tax and remitting said tax to the Director of Finance. This certificate does not authorize any person to conduct any unlawful business or to conduct any lawful business in any unlawful manner, nor to operate a hotel without strictly complying with all local applicable laws, including but not limited to those requiring a permit for any board, commission, department or office of this city. This certificate does not constitute a permit."

(Prior code § 13005.)

• A. Each operator shall, on or before the last day of each calendar month, prepare a tax return to the director of finance of the total rents

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charged and received and the amount of tax collected for transient occupancies for the preceding calendar month. At the time the tax return is filed, the full amount of tax collected for the preceding month shall be remitted to the director of finance.

• B. Operators whose annual tax debt to the city under this chapter is less than one hundred thousand dollars may elect to pay the taxes due under this chapter on a quarterly basis. These eligible operators shall, on or before the last day of the month following each calendar quarter, prepare a tax return to the director of finance of the total rents charged and received and the amount of tax collected for transient occupancies. At the time the tax return is filed, the full amount of the tax shall be remitted to the director of finance.

• C. Those eligible operators who choose to pay on a quarterly basis must state their intention by completing the necessary form provided by the director.

• D. All tax returns shall be completed on forms provided by the director.

• E. For purposes of this chapter, all payments made to each operator by credit card shall be deemed received and collected on the date that the credit card is presented as payment for transient occupancies.

• F. Tax returns and payments are due immediately upon cessation of business for any reason.

(Prior code § 13006; Ord. 24665.)

It shall be the duty of every operator liable for the collection and payment to the city of any tax imposed by this chapter to keep, and preserve for a period of three years, all records as may be deemed necessary by the city to determine the amount of such tax as he may have been liable for the collection of and payment of to the city, which records the city shall have the right to inspect at all reasonable times.

(Prior code § 13010.)

• A. Any operator who fails to remit within the time required by this chapter any tax collected by the operator shall pay a first penalty of ten percent (10%) of the amount of the delinquent tax in addition to the amount of the delinquent tax.

• B. Any operator who fails to remit any tax collected pursuant to this chapter on or before thirty (30) days after its due date shall pay a second penalty of ten percent (10%) of the amount of the delinquent tax in addition to the amount of the delinquent tax and the first penalty.

• C. If the director of finance determines that the failure to remit any tax on or before the due date set forth in this chapter is because of an intentional, material misrepresentation or omission, or fraud by the operator, the director shall impose an additional penalty in the amount of twenty-five percent (25%) of the delinquent tax.

• D. Any operator who fails to remit on or before the due date any tax collected by the operator pursuant to this chapter shall pay interest on the delinquent tax and on any assessed penalty or penalties as set forth in Chapter 1.17 of Title 1.

• E. The director shall waive the first penalty of ten percent (10%) imposed upon any operator if:

  1. The operator applies to the director for such a waiver no later than thirty (30) days from the date the remittance was due to the city; and

  2. The operator has made timely payments for: (a) the five (5) years immediately prior to the date the remittance was due to the city; or (b) the two (2) years immediately prior to the date the remittance was due to the city if it has operated the hotel for fewer than five (5) years; and

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3. The operator provides evidence satisfactory to the director that:

   • a. payment of the delinquent remittance was postmarked or received by the city no more than three (3) days after its due date; or

   • b. the operator mistakenly made payment to a party other than the city on or prior to the date that payment was due to the city, and paid the delinquent remittance and accrued interest owed the city prior to applying to the director for a waiver; or

   • c. failure to pay timely was due to circumstances beyond the control of the operator and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, and the operator paid the delinquent remittance and accrued interest owed the city prior to applying to the director for a waiver.

• F. The waiver provisions specified in Subsection E. shall not apply to interest accrued on the delinquent payments.

(Prior code § 13007; Ords. 26171, 27863.)

If any operator fails or refuses to collect the tax and to make any report and remittance of the tax or any portion thereof as required by this chapter, the director of finance shall proceed in such manner as the director may deem best to obtain facts and information on which to base his or her estimate of the tax due. As soon as the director of finance shall procure such facts and information as the director is able to obtain upon which to base the assessment of any tax required to be remitted under this chapter by any operator who has failed or refused to collect the same and to make such report and remittance, he or she shall proceed to determine and assess against such operator the tax, interest and penalties provided for by this chapter. In

case such determination is made, the director of finance shall give a notice of the amount so assessed by serving it personally or by depositing it in the United States mail, postage prepaid, addressed to the operator so assessed at his or her last known place of address. Such operator may, within ten days after the serving or mailing of such notice, make application in writing to the director of finance for a hearing on the amount assessed. If application by the operator for a hearing is not made within the time prescribed, the tax, interest and penalties, if any, determined by the director of finance shall become final and conclusive and immediately due and payable. If such application is made, the director of finance shall give not less than five days' written notice in the manner prescribed herein to the operator to show cause at a time and place fixed in said notice why said amount specified therein should not be fixed for such tax, interest and penalties. At such hearing, the operator may appear and offer evidence why such specified tax, interest and penalties should not be so fixed. After such hearing the director of finance shall determine the proper tax to be remitted and paid, and shall thereafter give written notice to the person in the manner prescribed herein of such determination and the amount of such tax, interest and penalties. The decision of the director shall be final and conclusive. Any amount found to be due shall be immediately due and payable to the city upon the service of the director's final determination. (Prior code § 13008; Ord. 29145.)

Editor’s note— Ordinance 29145, passed September 18, 2012, repealed Section 4.72.120, which pertained to appeal - city council authority.

• A. Whenever the amount of any tax, interest or penalty has been overpaid or paid more than once or has been erroneously or illegally collected or received by the city under this chapter, it may be refunded as provided in Subsections B. and C. of this section provided a

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written claim for refund is filed with the director of finance, and the provisions of Chapter 4.82 are satisfied.

• B. An operator may obtain a refund or take as credit against taxes collected and remitted the amount overpaid, paid more than once, or erroneously or illegally collected or received by the city by filing a claim in the manner provided in Subsection A. of this section, but only when the operator establishes to the satisfaction of the director of finance that the person from whom the tax has been collected was not a transient; provided, however, that neither a refund nor a credit shall be allowed unless the amount of the tax so collected has either been refunded to the transient or credited to rent subsequently payable by the transient to the operator.

• C. A transient may obtain a refund of taxes overpaid or paid more than once or erroneously or illegally collected or received by the city by filing a claim in the manner provided in Subsection A. of this section, but only when the tax was paid by the transient directly to the director of finance, or when the transient having paid the tax to the operator, establishes to the satisfaction of the director of finance that the transient has been unable to obtain a refund from the operator who collected the tax.

• (Prior code § 13011; Ord. 27787.)

Any tax required to be paid by any transient under the provisions of this chapter shall be deemed a debt owed by the transient to the city. Any amount of money owed to the city by an operator pursuant to this chapter which has not been paid to the city shall be deemed a debt owed by the operator to the city. Any person owing money to the city under the provisions of this chapter shall be liable to an action brought in the name of the City of San José for the recovery of such amount. (Prior code § 13012.)

• A. Any operator liable for payment to the city of the tax who sells or otherwise disposes of a hotel, and the operator's successor, shall notify the director of finance of the date of sale at least thirty days prior to the date of the sale or, if the agreement to sell or otherwise dispose of the hotel was made less than thirty days prior to the date of the sale, no later than the date of the agreement. The successor shall withhold from the operator in trust for the account of city a portion of the purchase price sufficient to pay the amount of the tax owed to city until the operator secures a written "transient occupancy tax clearance certificate" from the director of finance stating that no tax is due from the operator through the date of the sale. If no transient occupancy tax clearance certificate is presented by the operator to the successor within thirty days after the successor commences operation of the hotel, the successor shall immediately deposit with the director of finance the amount withheld from the purchase price to be applied to the amount of the tax owed by the prior operator.

• B. If the successor fails to withhold the amount required by Subsection A. above, the successor is liable to city for payment of the tax owed by the operator.

• C. The director of finance shall, within thirty days of receipt of a written request for a transient occupancy tax clearance certificate, either issue the certificate or give written notice to the operator, with a copy to the successor, of the amount of tax which must be paid to secure issuance of the transient occupancy tax clearance certificate. The transient occupancy tax clearance certificate shall be a defense, available solely to the successor and not the operator, to any claim the city may assert against the successor for the amount of the tax owed by the operator.

• D. Any operator from whom the successor has withheld and paid to the city a portion of the

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purchase price may challenge the director of finance's determination pursuant to Subsection A., by making application in writing for a hearing on the amount determined by the director of finance within ten days of mailing by the director of finance. Following receipt of a timely request for hearing, the hearing provisions of Section 4.72.110 shall apply. (Ord. 29145.)