San Jose small businesses get break on paying taxes

After being hammered by the pandemic, small businesses will have one less expense to incur — at least for now.

The San Jose City Council on Tuesday unanimously approved a nine-month extension of a program that waives the city’s business license tax for businesses hurt by COVID-19. The extension will run from Oct. 1, 2021 through June 30, 2022. The program started on Oct. 1, 2020, and was set to expire on Thursday.

According to city officials, 5,500 businesses may be eligible for an exemption. A business may be eligible if the owner’s gross receipts are less than $25,760 or if the business owner and spouse have combined gross receipts that are less than $51,520.

The city estimates it could lose about $900,000 in tax revenue over the nine-month extension. It is unclear how the city will make up the shortfall in revenue.

Ken Kelly, executive director of the Winchester Business Association, has made a concerted effort to reach small businesses amid the pandemic to ensure they know about these financial programs. Kelly says business taxes and licensing fees create an added burden, and that any help from the city can ease the stress. It’s been especially tough for immigrant-owned businesses, which have had to navigate the pandemic and a language barrier for specific resources.

“(The pandemic) has been particularly tough on ethnic-oriented businesses that exist throughout the city,” Kelly said.

Kelly spoke about his experience working with local Korean-American businesses who needed to speak with city officials in their language.

“That’s been one of our goals: to make sure we’re not saying, ‘OK, we’re going to talk to you in English,’” Kelly said. “You might not understand, but that’s what we’re going to do.’ The city made sure we were able to talk to those folks in languages they understood.”

San Jose Councilmember Sylvia Arenas said only a small number of businesses have reached out to the city to take advantage of the business license tax extension.

“The majority of our small businesses are immigrants and they employ quite a number of folks and contribute to our local economy,” Arenas said.

According to the city, it sent more than 33,000 emails to businesses that were eligible in various languages. City officials pledged to continue to reach out to ethnic-based groups and businesses.

How it works

The city’s business license tax, which business owners pay annually ranges from $206 to as high as $166,311, depending on the employee headcount.

For example, a sole proprietorship with only one employee would pay the base tax of $206, while a business with 20 employees pays approximately $664. A business with 100 employees would pay approximately $4,400 annually. Rates are capped at $116,311.

According to the city, more than 19,000 business and residential landlords were contacted about the exemption from Oct. 1, 2020 through June 30, 2021. Officials said 2,290 businesses applied for an exemption, with 1,430 approved. The city estimates it lost out on $409,127 in revenue for all exemptions applied through June 30, 2021.

Since the pandemic, San Jose lawmakers have enacted various measures to try and stem the flow of losses from small businesses.

Those measures include starting Silicon Valley Strong, a collaboration between businesses, nonprofits and local government to provide COVID-19-related resources. A moratorium on small business evictions was enacted in March 2020 and officials extended the city’s outdoor dining program to help local restaurants. The council voted in March to give certain workers—such as grocery and other essential workers—hazard pay, though that decision has garnered potential legal challenges. They also voted in May to approve a policy that allows hospitality workers who were laid off during the pandemic to sue to get their jobs back.

“I’ve gone out door to door and I know my colleagues have gone out door to door for a lot of the businesses that keep me up at night,” said Councilmember Maya Esparza. “Some of them are not on email at all, so I think that extra in-person, multilingual outreach is going to be really helpful and important in getting them to take advantage of (the program).”

To apply for or learn more about the program, click here.

Contact Lloyd Alaban at [email protected] or follow @lloydalaban on Twitter.