City of Santa Barbara - Business - Business License - Frequently Asked Questions

· Specific Questions for City of Santa Barbara

· Questions about Business License Notices

If you need further business license assistance, you are welcome to contact our staff at the Finance Department located on the first floor of City Hall at 735 Anacapa Street, Santa Barbara, CA 93101.

General Questions

What is a Business License Tax Certificate?

A Business License Tax is an annual tax you pay each fiscal year for doing business within the incorporated area of the City of Santa Barbara (City). The City's municipal code requires that you obtain a license PRIOR to conducting any business activity within the City - even if your business is located outside the city limits or you have a business license from another city. The Business License Tax Certificate, is evidence only that your tax has been paid. Other permits may be required to open your business. A separate tax certificate is required for each type of business at the same location or for each branch location. Receipt of a Business License does not constitute an endorsement of the business, nor does it grant permission to conduct business at any place prohibited by the City’s Zoning Ordinances or any other Federal, State, or Local regulation.

Who is required to have a license?

Any person who conducts business in or is based from the City must obtain a business license tax certificate. Conducting business in the City without a license can result in penalties, notice of violations, citations, and finally, court action.

What if I also conduct business in the unincorporated area of the County of Santa Barbara?

You will need a Santa Barbara County business license to conduct business in any unincorporated area of Santa Barbara County. Check with the County’s Tax Collector’s Office (805) 568-2933.

I conduct business in several cities. Can I get just one license to do business in ALL of them?

Unfortunately, no. Each city has its own business license tax requirements and you must have a business license from the jurisdiction business is being conducted in.

I have a County of Santa Barbara Business License, that should cover the City’s jurisdiction?

No, any person who conducts business in the City must obtain a City of Santa Barbara business license tax certificate. The County of Santa Barbara is responsible for jurisdictions not Incorporated, such as Isla Vista, Montecito, Santa Ynez and Summerland.

Why must I pay a tax to do business in the City?

By City Code, the tax imposed through the taxing power of the City is solely for the purpose of obtaining general revenue. Business taxes help pay for city services like roads, fire and police, and other community services.

How long is this license good for?

Your license is good from the “Open Date” to the following year; for a twelve (12) month period.

How much will the Business License cost?

That depends on the type of business and its location. View the description section of the application for your type of business, then see the corresponding business tax rates on the following page for payment amount. Submit this amount with your application. Contact Finance staff for further assistance.

My business is just starting, what gross receipts do I use?

A new business is taxed using “estimated” gross receipts amount from the start of business to the next 12 months. The following license year renewal cost will be based the gross receipts as reported to the I.R.S. for Federal Income Tax purposes.

What exactly are “gross receipts”?

Gross receipts are what you receive such as cash, credit, and/or property taken in lieu of cash payments for the goods or services that you sell.

• But my business does not generate any gross receipts.

See description of business, on the application, for the corresponding letter code to determine your Business License Tax, if you need assistance, please contact Finance staff.

• But, I don’t make much money. It’s a very small business.

Even if you conduct business on a part-time, limited, or hobby-related basis, you are required to obtain a current business license. Note: if your business earns zero gross receipts, it is assumed you are conducting business, until you notify the City of its closure. Contact Finance staff if you have any further questions or concerns.

Will the City notify me when to renew my license?

Yes. However, it is your responsibility to obtain a current tax certificate whether or not a renewal notice is received. Penalties are assessed for delinquent accounts, regardless of whether you receive a renewal notice or not. If you do NOT receive a notice by the expiration date of your Business License Tax Certificate, please be sure to contact the Finance Department immediately.

Do I need a D.B.A. or Fictitious Business Name?

Yes. If your business name is anything other than your surname or has more than one owner. Contact the County of Santa Barbara Hall of Records.

What about selling food?

If selling or preparing food, a Health Permit is also required from the County Environmental Health Department, in addition to the business license tax certificate.

Are there any restrictions on where I do business?

Every business must meet zoning and building requirements to ensure that its business category and site are compatible BEFORE SIGNING any leases contact our Zoning Department for further information. (Located at 630 Garden St.)

Commercial business locations

Check with the City’s Community Development to determine what building modifications, if any, may be necessary for your business type. Usually, a fire inspector will visit your business in order to verify that your building or tenant area meets Fire and Building Code requirements and will issue your business location.

I have this neat idea for a great sign!

Please check with the Community Development Department before using or installing ANY type of sign: wall, window, banners, even balloons. Temporary signs require review and approval prior to issuance of permits and installation.

Do I need a license if I work out of my home?

Yes. Businesses operated from the home also require payment of a business license tax. The City’s Zoning Ordinance regulates the type of business operations that may be done in the home.

I have a State License (Real Estate, construction contractors, etc). Does this exempt me from City of Santa Barbara business license?

No. The City business "license" and your State license serve entirely different purposes. The regulatory licensing of certain trades rests entirely with the State of California. The City of Santa Barbara does not regulate, in any way, these industries. If your relationship to you employer is that of an "independent contractor" or you are self-employed and working in the City, you need to pay the City business tax.

When do I need a Seller’s Permit?

Every business intending to sell tangible goods – wholesale or retail, commercial or home based, sales or repair oriented – requires a California Seller’s Permit. To apply, contact the Board of Equalization, State Dept. of California. www.boe.ca.gov

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Specific Questions to City of Santa Barbara

I wanted to confirm a Business license, how can I do that?

Business license lookup link or you may contact our staff at (805) 564-5346.

I am no longer in business, what steps do I need to take?

· If you are no longer conducting business, please send notice to: City of Santa Barbara Business Licensing PO BOX 1990 Santa Barbara, CA 93102, provide the business name, address, certificate number and the date you stopped conducting business in the City. Please provide contact information, should we have any questions.

· If you sold your business, please provide the escrow closing date and the new owners name, address, phone # for contact.

· If you are moving away, please consider whether you will still retain clients within the city limits, if so you will want to retain your Business License Tax Certificate.

This information can be faxed to Business License: (805) 897-1978, documentation is required.

Attention: we do not automatically cancel your license if we don’t hear from you. We assume your payment is late and continue to send Billing Notices. Eventually your business name is placed on our delinquent list. So, please let us know, in writing, if you want your license canceled.

Change of ownership, what should I do?

Change of ownership will require a new Business License Tax Certificate. Proof of ownership, escrow papers etc will need to accompany the new application. Open date is the date the ownership took affect.

I have a change to my Mailing or Business Address what should I do?

Written notification should be mailed to: City of Santa Barbara- Business Licensing PO BOX 1990 Santa Barbara, CA 93102. Be sure to provide contact information in case staff has questions. If you would like to make changes in person come to the Finance Dept counter located at 735 Anacapa Street. Picture ID is required when making changes in person.

How can I obtain a copy of a prior year business license permit?

The City is not able to reprint prior business license certificates. If you wish to document proof of business history, you may request this by mail or the owner may come in person to our office. Allow 5 business days for processing.

I already have a Business License and want to open an additional business location do I need to apply for another Business License?

Yes, for each location, door entrance, and separate cash register, you are required to have a separate Business License Tax Certificate.

What is Parking Business Improvement Assessment (PBIA)?

Information regarding PBIA is located in our Business License Tax Application

Why am I receiving a billing from the Downtown Improvement District (DT or OT assessment)?

Information regarding Downtown Improvement District is located in our Business License Tax Application

I would like to sell hot dogs from a mobile cart or drive an ice cream truck through the streets of Santa Barbara, where can I go for a permit?

The Municipal Code does not allow street vending within the City of Santa Barbara.

I operate a Mobile Service are there any business restrictions?

Yes, be sure to contact Community Development to get restriction information. Code reinforcement is upheld by Law Enforcement.

We are a Non Profit Status Business what steps are we required to take if conducting business within the city limits?

Any Business conducted in City of Santa Barbara is required to have a Business License. Please complete the application and attach a copy of your Federal approval for Non-Profit status 501-C-3 form to be exempt from the business license tax.

I have a business complaint or suspicious business activities where can I report it?

· Illegal Activity: Police Department (805) 897-2300

· County Health Dept. food & drink establishments (805) 681-4900

· Better Business Bureau (805)963-8657

· Zoning and Building Code enforcement line (805)897-2676

My Business uses a Post Office Box in the City to receive mail, but it operates or is based outside the City. Do I need a business license for this?

Yes. Municipal Code says that if you represent business conduct at an address in the City, that is prima facie evidence of business conduct, therefore requiring a business license. The City requires businesses who use a Post Office box or a Commercial Mail Receiving Agency (CMRA) using a City of Santa Barbara address to obtain business licenses.

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Questions about Business License Notices

Why Did the City Send a Notice to Me?

The Finance Department is charged with enforcing the City's license requirement. As part of this, the Licensing Staff identify businesses that may not be in compliance with this requirement, and send notices to inform them of the requirement. They use a variety of filings, such as Seller’s Permits, DBA’s, periodicals, professional licensing and tax filings with higher authorities to identify these businesses.

Does anyone verify the information before sending out notices?

Yes. Prior to sending out notices, information records from the various agencies that provide data to the City are compared against the City's business license database. If no match is identified, the License Staff send out notices to notify the potential business that a license is required. If it turns out the potential business already has a license, or it is determined none is required, the record is closed.

I already have a business tax certificate with City of Santa Barbara, but I received a notice. What should I do?

We suggest responding to the notice via US mail. Please list the account number that appears on your Business License tax certificate. If you are conducting business under another name, different activity or additional locations, you will need to submit a separate Business License Tax Application for each. If you have any questions, you may contact us directly at (805) 564-5346.

Important Note. If the notice was mailed to a separate legal entity from the one that already has a business tax certificate, it may need to pay its own business tax. A business tax certificate is unique to legal entity, which is defined by the Employer ID Number (EIN).

How long do I have to respond to the notice(s)?

To avoid the imposition of accrued penalties, you must remit the business tax application and payment on or before the due date on your notice. This date is always fourteen (14) days after the date of the notice. The delinquency date is the first day the penalty will be applied.

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Additional In-depth Questions

What if I have more than one business?

If you own more than one business, a separate business license tax certificate is needed for each one. Call Finance Department staff for details.

I am paid on a “1099” basis with my employer (not as an employee), do I need a business license?

Yes, if you are not an employee, you are considered an Independent Contractor/ self employed. Providing services to, or on behalf of a business, may be of an employee/employer or an independent contractor relationship depending on the nature of work and span of control involved. Determining the relationship between you and your employer (or employee) can sometimes be confusing. However, put simply, if you are not paid as an employee, you are considered an Independent Contractor and are required to have a business license.

Fortunately, the State Department of Employment Development (EDD) has a very helpful booklet highlighting specific guidelines to follow in determining the correct relationship between you and your employer or employee.

Contact EDD if you are unsure of the relationship. Once a determination has been made that your relationship is not that of an employee/employer, then by default, it is that of an independent contractor subject to a business license.

If the City’s business license doesn’t regulate professionals and trades people, what does the license do?

The City of Santa Barbara business license is a tax on the privilege of conducting business in City of Santa Barbara and is solely to raise revenue for municipal purposes (e.g. police & fire). The payment for a business “license” simply reflects a tax payment in much the same way as the “license” plate on a car represents a tax payment.

I do a small amount of consulting and all my clients are located outside the City. Does this require a license tax certificate?

Yes. If your consultancy is based from a location in the City, you need a business license for that location. The location of and the number of clients does not have any bearing on whether a license is required since the requirement applies to your business.

There are several legal entities associated with my licensed business. These entities do not derive any revenue, nor do they have employees. They are simply passive entities that exist for an accounting purpose. Do these really require a business license?

In short, yes. City of Santa Barbara business tax is not contingent upon revenue, nor does the presence of employees influence the requirement. In fact, the city law does not distinguish between "active" and "passive" entities in the application of business tax; if the legal entity is registered active with other agencies and it is required to complete a return to the IRS and Franchise Tax Board, then it is also required to have a City of Santa Barbara business license tax certificate.

I created a legal entity (such as a family partnership, investment partnership) as an administrative convenience and file as a business entity with the IRS and Franchise because they require it. Since this entity does no "business", is it required to pay business tax?

Yes. Any entity that holds itself out as a trade or a business in the City needs to register for and pay business tax. City code does not permit us to consider the reason for the formation of a business entity in applying the business tax requirement. Additionally, state law directs all cities to use the manner in which a taxpayer reported income to determine whether that taxpayer acted as a business.

I formed a legal entity to facilitate my estate planning and to avoid having my children burdened with taxes. Clearly, there is no business purpose for this - does the City believe it still needs a license?

Yes. The reason for the formation of a legal business entity cannot play a role in determining whether it requires a business license. Many estate planning web sites that advocate the use of legal entities state clearly that there is nothing that distinguishes a legal entity set up for estate planning from one that is set up to operate a business interest. In fact, due to IRS regulations, these sites state there must be a clear business purpose for these entities. In other words, there is nothing that legally distinguishes a family limited partnership (FLP) from any other type of partnership. As a result, the City must treat these estate planning entities in the same manner as any other type of legal business entity.

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