Town says business tax on landlords is 'equity'
By Nathan R. Huff
Los Gatos property owners may not consider themselves business owners, but if they have one commercial tenant or three residential units, that's just how the business licensing department views them.
A number of commercial property owners reacted angrily to letters sent out by the town's finance department announcing that landlords needed to apply--in effect, pay--for a business license if they collected lease or rent.
While the town code states that anyone who carries on "any business, trade, profession, calling or occupation" must have a town business license, landlords have never been required to acquire licenses--until now.
"I don't know anybody who's paid this in 30 years," said downtown property owner and merchant Larry Arzie, who wrote the town a letter raising questions about the licensing requirement.
According to business license administrator Stephanie Gutowski, rent-collecting property owners had just slipped through the cracks of the town code. Gutowski has been systematically auditing businesses for the past two-and-a-half years, checking to make sure all the doctors, contractors and accountants in Los Gatos have the necessary licenses.
"This is just another audit process," said Gutowski, who has used information from the county assessor to determine parcel ownership. "Since this is a business and they are in town, they need a license."
The licensing fees for commercial businesses are based on the gross receipts, or sales, a business does in a year. In the case of commercial landlords, it's calculated by the amount of rent collected. Effectively, the town is able to collect twice on the same commercial property, once from the business owner and once from the property owner.
Landlords who operate three or more residential units on one parcel of property--whether the units are apartments or not--must also pay for a license, though the rate is only $7.50 per unit. Landlords who own only a single unit are not subject to the licensing requirement, and neither are duplex owners, though the latter must pay a rental mediation fee for each unit. People who sublease part of their rental are not required to get a license, either.
According to Arzie, it's not the actual dollar amount that's so troubling, but the ramifications. Most landlords will simply pass the cost on to their tenants, he said, tenants who are already feeling the pinch of competition and slow sales.
But Gutowski said it's just a matter of fairness. Landlords have made money for years collecting rent, and they should be subject to the same licensing requirements as every other business owner. "It's an equity thing," she said.
Saratoga has a similar code in place, though the fee structure is different. After a flat $100 fee, licenses are calculated on square footage. Residential landlords become business owners once they have more than four units.
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Los Gatos, California Since 1881
