Yorba Linda increases efforts to collect business license taxes; sets six-month amnesty period

An increased effort to gain voluntary compliance to Yorba Linda's business license ordinance that includes a six-month amnesty period for unlicensed businesses has received unanimous approval from Yorba Linda's City Council.

“Compliance with the business license ordinance should be viewed no differently than compliance with any other local ordinance or state and federal law,” Finance Director Scott Catlett reported to council members.

So the city will be implementing “a more proactive, but still business-friendly, approach to enforcement of the city's business license ordinance,” Catlett stated.

Business license taxes bring in about $400,000 each year, but enforcement efforts could bring in $50,000 more, although “it is likely to be less than this amount,” according to Catlett.

Historically, the city has used “a passive approach to enforcement,” Catlett noted, adding that compliance “while high in retail centers is likely lower, though still good, for other types of businesses.”

He identified these as businesses located in office parks; mobile businesses, such as swimming pool, lawn maintenance and cleaning services and plumbing, electrical and other contractors; home-based businesses; and short-term vacation rentals.

Also, businesses not located in the city but doing business here, such as lawn maintenance and plumbing services, must have a Yorba Linda business license, Catlett noted. “Compliance for these businesses is also good, but again not to the level seen for retail centers.”

Catlett didn't recommend changes to tax rates and penalties, which would require a public vote. Rates are minimal and not adjusted annually for inflation and probably haven't been increased since 1973, he noted.

The “primary benefit of the city's business license requirement is to ensure that businesses operating within the city are known to the city and located in appropriately zoned/permitted locations,” Catlett stated.

Options to improve enforcement include online research using sources such as sales and property tax databases and lists of business utility accounts, periodic field surveys of businesses cross-referenced with the business license database and sharing information with the state's Franchise Tax Board.

The latter would include the city and board exchanging names of owners, addresses and types of businesses from each agency's databases, without providing financial information.

To avoid a perception “the city is simply out to increase revenue,” amnesty and education programs that include “carefully crafted letters to violators” will be conducted, Catlett stated.

Collection of unpaid license taxes is limited to the current and three prior years, which could amount to 800 percent of an annual payment when penalties are added. The amnesty would waive back taxes and penalties during a six-month period, with waivers considered on a case-by-case basis after the amnesty period ends.