The Willow Glen Resident

Council Watch

Real estate agents are not self-employed, council says

City will charge them only $18 a year in taxes

By Mary Spicuzza

The Finance Department saw things differently, but in the end, the City Council decided that for tax purposes, San Jose real estate agents are not their own bosses. And for agents in Willow Glen's booming real estate market, that means enormous tax relief.

The council made this decision Aug. 4 in voting to approve the Finance Committee's Business Tax Amnesty Program, developed to allow those who owe back taxes to the city to make their payments without penalty (See related story, page 10). The program was originally proposed in 1994, but the Finance Department encountered opposition when staff wanted to collect an annual assessment of $154.50 from each real estate agent, on the premise that they work as independent contractors.

Last week, the council agreed with lobbyists from the San Jose Real Estate Board, who argued that real estate agents are employees of the brokers they represent. So now agents will only owe $18.54 apiece in back taxes for each of the last two years.

"We are very happy with the outcome," San Jose Real Estate Board President Pam Foley said. "We're pleased that the Finance Department has been willing to work so closely with us."

But Joe Guerra, chief of staff for District 6 councilmember Frank Fiscalini, pointed out that the Finance Department's staff was vehemently opposed to the lower tax rate for agents. The department firmly held its position that unless an individual can produce a W-2 form or legal proof of employment, they should be paying the minimum tax rates for independent businesses.

"I'm a former Realtor--both agent and broker," Guerra said. "I never had any question in my mind that agents are employees."

The business tax office in the Department of Finance declined to comment, saying staff will only discuss the matter after the three-month amnesty period begins on Sept. 14.

Foley said the real estate board used its strong lobby power to fight the full business-tax assessment for agents. She pointed out that only 4,000 of the 10,000 agents who work in Santa Clara County are real estate board members.

"The philosophy is that an agent cannot be in business without a license. ... Agents must be affiliated with a broker," Foley says, stressing that agents are hardly independent entities.

The amnesty period lasts until Dec. 15. After that time the waiver becomes invalid, and any unpaid taxes, penalties and interest, will become immediately due. Agents and Realtors need to decide among themselves who's going to foot the bill. But whoever does, it will be only a shadow of the business tax amnesty program's original fee.

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