Proposed Business License Tax Measure

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Background

The Cupertino City Council is considering placing a measure on the November 2018 ballot to restructure the City of Cupertino’s business license tax. The goal would be to generate $10 million annually to fund transportation projects to improve the City’s transportation infrastructure and alleviate local traffic congestion.

Most businesses in Cupertino pay a basic business license fee of $144 a year plus a rate based on square footage occupancy. The City’s current business license tax, enacted in 1992, is estimated to generate about $800,000 in revenue for Fiscal Year 2017-18.

Roughly 99% of Cupertino businesses have fewer than 100 employees while approximately 32 businesses have more than 100 employees. The City is considering moving towards an employee-based structure with large businesses paying progressively more per employee, with medium and small businesses paying a basic flat fee. The two models below are potential employee-based structures where employers with fewer than 100 employees would pay only a flat fee.  Businesses with 100 employees or more would pay the flat fee plus an incremental rate for every employee above the 99 employee threshold. The incremental rates progressively increase with the number of employees.

Model 1 7.31.18

Model 2 7.31.18

Model Assumptions: 
1. There are about 3,800 active business licenses in Cupertino.
2. Data on the number of employees was estimated based on data from the CA Employment Development Department and the U.S. Census Bureau’s 2016 Zip Business Patterns. 
3. There are about 2,200 business licenses where the business location is outside of Cupertino. 
4. Businesses with different locations but the same owner were combined. 
5. Non-profits and other exempt businesses are exempt from the tax and therefore not included. 
6. These are estimates based on the last two years of business license data.  Numbers are likely to shift if an employee based tax is imposed. 
7. There is no cap on any of the models. 

Timeline

 June 5, 2018 City Council Study Session
 June 19, 2018 Follow Up City Council Study Session
 July 3, 2018 Follow Up City Council Study Session
 July 31, 2018 City Council Special Meeting

 
At the July 31, 2018 Council meeting, Council decided to delay the proposed business license tax measure until 2020. The business community, including Apple, has expressed interest in working with the City towards a solution to improve transportation and traffic conditions.  The City will work closely with the business community to develop these solutions. 

Business Forums

To engage with the the business community, the City held two Business Forums.  The presentations from the forums can be found below. 

June 18, 2018 Business Forum

July 24, 2018 Business Forum