Important changes have been made to the San José business tax , which was approved by San José voters on November 8, 2016 (Measure G). The approved changes took effect on July 1, 2017 and impact REALTORS, brokers, and rental property owners of single family homes and duplexes.
The City’s business tax was first adopted in 1963, and the methodology for calculating the current business tax was first adopted in 1984. The current rates had not been increased since 1986. Last year, more than 65% of San José voters approved the business tax increase, Measure G and new rates at the November 2016 election.
The adjustments to the business tax that took effect on July 1, 2017, include:
- Increasing the base tax from $150 to $195.
- Increasing the incremental tax and making it more progressive
- Increasing the cap (the maximum amount of the tax affecting large businesses)
- Updating the application of the tax to more classes of businesses
- Adding inflation-based adjustments for future tax rates
ONLINE REGISTRATION AND PAYMENT
Businesses are able to register and pay their business tax online. More information can be found on the “Make a Payment” website.
VOTER APPROVED CHANGES TO THE BUSINESS TAX
- The charts on the Business Tax Rates page represent the structure of the current and voter-approved business tax rates effective July 1, 2017.
- Addition of a Financial Hardship Exemption for Small Business Owners with Limited Household Income
- San José currently allows for several exemptions for the payment of the current business tax based on the poverty level guidelines established by the U.S. Department of Health and Human Services. The HHS poverty level is currently set at $12,060. Since the cost of living in the Bay Area is greater than the national average, the City Council approved an income threshold at two times (2X) the annual level established by the HHS which is $24,120. This hardship exemption is applied based on business income regardless of total household income.
- As part of the modernization, San José voters approved adding an additional exemption category for small business owners with limited household incomes. A small business can be exempt where the adjusted gross income of the small business owner does not exceed four times (4X) the annual poverty level established by the HHS. This threshold would be based on a household income of $48,240.
Extended Deadline to Register a New Residential Landlord Business — Now December 15, 2017
New residential landlords of one or two rental units will now pay the San José business tax for the first time as of July 1, 2017. The City Council established a grace period until December 15, 2017, so that these residential landlords can apply for and secure a valid business tax certificate from the City and pay the business tax without incurring penalties and interest. If the payment of the business tax is made after December 15, 2017, then interest and penalties will accrue retroactively to July 1, 2017.
Frequently Asked Questions:
How do I register my Business in San Jose?
Register your business online by clicking here.
How do I access paper forms?
For pdf forms, including Residential Rental Property Registration and Broker Declaration of Employed Sales Agents Please click here.
Do I qualify for a hardship exemption from the Business Tax?
You may also declare a hardship exemption by using the forms here. Businesses Exempt from the tax are sole proprietorships and small businesses with no employees with gross receipts less than $24,120 or household income below $48,240.
Who does the business tax apply to?
Rental Property Owners of all types, including room rentals, short term rentals, single family rentals and duplex rentals. Brokers, and their Agents are also responsible for the tax along with other small businesses.
What about Room Rentals?
If you rent a room in your home for long term rentals you will have to register as 1 unit. If it is a short term rental like Airbnb you will also have to register.
What are the costs?
$195 base cost. $30 per employee or agent under a broker beginning at the 3rd employee. No charge for the first two employees or agents. The rates for rental units are similar with the first two rental units having no additional costs with an added $10 per unit cost for owners of 3 – 35 rental units. Learn more about the business tax rates here.
What are the fines?
Each annual business tax payment is due and payable on the 15th day of the calendar month in which the business began.Should the tax remain unpaid by the due date, a penalty of 25% is assessed. Should the tax remain unpaid for a period exceeding one calendar month beyond the due date, an additional 25% penalty is assessed. The interest rate of 1.5% a month will also be assessed on unpaid tax and penalties.
How far back can they go back and fine you for past years?
If you are a business owner that owes a business tax before the implementation of Measure G, the city of San Jose will require retroactive payments and fines for unpaid taxes going back to January 2014.
If you are a business newly impacted by the business tax ordinance under Measure G, you have until December 15, 2017, to register your business with no fine or late fees.
Is the city is not notifying rental property owners and businesses of their new obligations under measure G?
The City of San Jose has not undergone proactive measures other than their usual communications channels.
For further questions and more information go to www.sanjoseca.gov/businesstax or call the San Jose Department of Finance at (408) 535-7055.