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HomeMy WebLinkAbout10/16/2018 06K Engaging in Business, Business License Fees and Out-of-City Business; YMC Amendment Ch. 5.52ITEM TITLE: SUBMITTED BY: BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT 1 Item No. 6.K. For Meeting of: October 16, 2018 Ordinance to amend Yakima Municipal Code Chapter 5.52 adopting State mandated regulations pertaining to: the definition of "engaging in business", adding a minimum threshold for out -of -city businesses, and amending the threshold for a license exemption for sole proprietorships Sara Watkins, Senior Assistant City Attorney Joan Davenport, Community Development Director Glenn Denman, Supervising Code Inspector SUMMARY EXPLANATION: Pursuant to EHB 2005, there are mandatory changes to city business licensing ordinances which must be in place on or before January 1, 2019. The Council Economic Development Committee forwarded the proposed changes to City Council for consideration. The changes are outlined with explanations in the attached memo along with the following documents: a. Redlined version of 5.52.020 which changes the definition of "engaging in business" as mandated by state law. b. Redlined version of 5.52.040 which adds a section that specifies the minimum threshold for out -of -city businesses as mandated by state law (staff's recommendation to choose Option 2). c. Redlined version of 5.52.050 which removes the exemption based on hours worked and changing it to an exemption based on minimum monetary thresholds for consistency with YMC 5.52.040. d. AWC short sheet "Final city business license model threshold". e. Proposed ordinance adopting the changes to YMC Chapter 5.52. ITEM BUDGETED: NA STRATEGIC PRIORITY: Economic Development 2 APPROVED FOR City Manager SUBMITTAL: STAFF RECOMMENDATION: Pass Ordinance BOARD/COMMITTEE RECOMMENDATION: The Council Economic Development Committee recommended approval to the full Council at their September 4, 2018 meeting. ATTACHM ENTS: Description Upload Date O memo business license changes 10/5/2018 CI Proposed Ordinanceclean version 10/Z2018 O Crdinancejedline 10;2/2018 O AWC Short Sheet 10/2/2018 Type Coer Memo Ordinance ordinance Backup Material MEMORANDUM TO: Honorable Mayor Kathy Coffey Yakima City Councilmembers FROM: Sara Watkins, Senior Assistant City Attorney Glenn Denman, Supervising Code Inspector DATE: September 25, 2018 SUBJ: Proposed Amendments to YMC 5.52 3 Mayor Coffey and Councilmembers: The Washington State Legislature passed a statute that requires cities to amend their business license code section effective before January 1, 2019, in two ways. Staff is bringing you the options, as well as staff's recommendation with regards to the proposed language. This memorandum outlines the options (where there are options) and the reasoning behind choosing that option. Staff held a meeting with legal, the supervising code inspector, and members of staff who deal with business licensing within the City prior to making this recommendation, and then presented it to the Economic Development Committee, which sent this matter on to the full Council with a change (discussed below). 1. Required Change #1: The definition of "engaging in business." The statute, RCW 35.90.080(2)(a) states: A city that imposes a general business license requirement must adopt the mandatory provisions of the model ordinance by January 1, 2019. The following provisions are mandatory: A definition of "engaging in business within the city" for purposes of delineating the circumstances under which a general business license is required. The model ordinance language was created by a development committee, working through the Association of Washington Cities, as specifically required by the statute. RCW 35.90.080(1)(a). The statute also required that before the model ordinance was finalized that there be "substantial input from business stakeholders and other members of the public." The full model ordinance, for which City staff is not seeking adopting in full, can be found online. State statute 1 only mandates that two provisions be adopted by all cities which conduct business licensing. The first provision mandated to be adopted is the definition of "engaging in business." The AWC model definition is proposed to be adopted as required by the statute. Please see the redlined version of Yakima Municipal Code 5.52.010. As you can see, the definition is much more specific and provides examples of businesses that must be licensed, as well as some exemptions that must be taken into account. Please note that there is no recommendation from staff to eliminate the City's additional exemptions from licensing found in YMC 5.52.050. 2. Required Change #2: Minimum threshold for license fees RCW 35.90.080(2)(b) & (3) requires that all cities that impose business license requirements also adopt: A uniform minimum licensing threshold under which a person would be relieved of the requirement to obtain a city's general business license. A city retains the authority to create a higher threshold for the requirement to obtain a general business license but must not deviate lower than the level required by the model ordinance. A city may require a person that is under the uniform minimum licensing threshold as provided... to obtain a city registration with no fee due to the city. AWC provided two threshold options, of which cities are required to adopt one— with the acknowledgement that the City could change the minimum threshold amount to make it higher. The two options are as follows: a. Option 1: Threshold exemption To the extent set forth in this section, the following persons and businesses shall be exempt from the registration, license and/or license fee requirements as outlined in this chapter: (1) Any person or business whose annual value of products, gross proceeds of sales, or gross income of the business in the city is equal to or less than $2,000 (or higher threshold as determined by city) and who does not maintain a place of business within the city shall be exempt from the general business license requirements in this chapter. The exemption does not apply to regulatory license requirements or activities that require a specialized permit. b. Option 2: Threshold with Fee -free License/Registration-only 2 4 5 For purposes of the license by this chapter, any person or business whose annual value of products, gross proceeds of sales, or gross income of the business in the city is equal to or less than $2,000 (or higher threshold as determined by city) and who does not maintain a place of business within the city, shall submit a business license registration to the Director or designee. The threshold does not apply to regulatory license requirements or activities that require a specialized permit. City staff recommended that the City use option 2, extend it to all businesses (not limit it to out of town businesses) and increase the minimum threshold to $7,000 (this was based on the number of hours exempted-600—multiplied by the minimum wage for that number of hours). After discussion at the Economic Development Committee meeting, the Committee increased the minimum threshold to $12,000.00—an average of $1,000.00 gross proceeds of sales or gross income. a. Why staff recommends using option 2 Option 2 is recommended, which requires businesses (unless otherwise specifically exempted) to register with the City, and exempts some businesses from paying the license fee. This option is the preferred option because by issuing a business license to every business there is a record with the City of where businesses are located, the types of businesses being opened, and other data and information about businesses in Yakima. This is also consistent with the City's current practice to require businesses which are exempt to register, but not pay the business license fee. Further, by issuing a license, if a business were to violate any ordinance provisions, the license could be suspended or revoked. If the City provided for the exemption without requiring a cost-free license, it creates a situation where it is hard for the City to know where businesses are locating, ensure zoning regulations are followed, or hold businesses accountable for violations of code provisions. b. Why staff recommends extending the definition to include in - City sole proprietorships, not just out-of-town businesses Although the mandatory language is for businesses that do not maintain a place of business within the city limits, staff recommends that the definition be extended to both in -city sole proprietors and out-of-town businesses for consistency. Currently in -City sole proprietorships are exempt from licensing if they work less than 600 hours that year. To keep exemptions consistent, staff felt that the sole proprietorship exemption should also be based on gross sales or product, not on hours worked per year. c. Why staff recommended increasing the minimum threshold. Staff thought that the state's adopted minimum threshold would not be consistent with current exemptions, and was so low that it would not exempt very many businesses. 3 Currently, one of the City's exemptions is for sole proprietors who have no employees and operate Tess than 600 hours. YMC 5.52.050(1). To create consistency, clarity and transparency, City staff recommends eliminating the exemption based on hours worked for sole proprietorships, and enacting the exemption based on gross sales or products across the board to both in -city sole proprietorships and out-of-town businesses. 6 A monetary minimum threshold amount is more easily verified if there is a complaint (compared to a threshold based on hours worked), and it provides a clear delineation that can be tracked and estimated at the time of licensing by business owners. Staff believed it was a clearer standard to explain and a clearer standard to understand. Further, the minimum threshold in a dollar amount is mandated for out-of-town businesses by EHB 2005, so it would be inconsistent to have a dollar amount threshold for out-of-town businesses, and a maximum hours worked for an in -city sole proprietor business. As such, staff recommended extending the mandated process of using gross sales to the in - city sole proprietorships as well. 3. Deadline The state -mandated changes must be enacted and be in force before January 1, 2019. If the changes are not adopted by the City by that time, then the City cannot enforce its business licensing ordinances. As such, staff brought this to the Economic Development Committee in September rather than waiting until closer to the end of the year. 4. Anticipated future business license changes To provide more context for this change, staff wants to provide some information about future business license changes within the City. The state, pursuant to RCW 19.02, is requiring all jurisdictions that have business license regulations to ultimately utilize the state Business Licensing System (BLS) by 2022. This will provide easy access to business owners to go online and apply for both their state and local business licenses at the same time. Business owners (except for those requiring City -required licenses under separate sections of the Yakima Municipal Code, such as, for example, Mobile Food Vendors (YMC 5.57) or Peddlers (YMC 5.56)) will be able to obtain all the necessary licenses online without having to come to City Hall, and can make payment directly online. This should streamline the majority of business licenses in the City for business owners. City staff will need to amend the City's business license ordinance more than the mandated changes that are required right now. The City was recently notified that Yakima is slated to be added to the BLS in 2020. We look forward to bringing these proposed changes first to the Economic Development Committee for discussion in 2019. 4 5. Enclosures With this memo in your packet are the following documents: a. Redlined version of 5.52.020 which changes the definition of "engaging in business" as mandated by state law. b. Redlined version of 5.52.040 which adds a section that specifies the minimum threshold for out -of -city businesses as mandated by state law (staff's recommendation to choose Option 2). c. Redlined version of 5.52.050 which removes the exemption based on hours worked and changing it to an exemption based on minimum monetary thresholds for consistency with YMC 5.52.040. d. AWC short sheet "Final city business license model threshold." e. Proposed ordinance adopting the changes to Chapter 5.52. 5 7 8 ORDINANCE NO. 2018 - AN ORDINANCE amending the City of Yakima Municipal Code Chapter 5.52 relating to engaging in business, business license fees and out -of -city businesses. WHEREAS, the Yakima Municipal Code regulates businesses within the City, as well as requires a business license for businesses which are not located within the City but engage in business within the City; and WHEREAS, in 2017, EHB 2005 was passed by the Legislature and later codified as RCW 35.60, which simplifies business licensing throughout the state; and WHEREAS, EHB 2005 requires a number of actions during the next few years, including changes to city business license regulations which must be effective before January 1, 2019, or a city cannot exercise its authority under its regulations; and WHEREAS, EHB 2005 requires that city ordinances be changed to adopt a definition of "engaging in business" that was created by a workgroup convened by the Legislature, which included the Association of Washington Cities (AWC); and WHEREAS, EHB 2005 also requires that city ordinances be changed to adopt a threshold which applies a minimum threshold of gross income or sales before a city can be required to obtain a local business license if that business does not have a location within the city, and allows the city to require registration of all businesses, even if they don't meet the threshold; and WHEREAS, the members of the Economic Development Committee reviewed the materials regarding these mandatory changes, discussed the minimum threshold amount, and determined that increasing the minimum threshold to $12,000.00 was appropriate for both businesses located outside the City and sole proprietors within the City for consistency; and WHEREAS, the City Council of the City of Yakima finds that it is in the best interests of the City and its residents to amend Chapter 5.52 to comply with EHB 2005, amend the definition of "engaging in business" and adopt a minimum threshold for when an out -of -city business or sole proprietor needs to pay for a business license; now, therefore, BE IT ORDAINED BY THE CITY OF YAKIMA: Section 1. The City of Yakima Municipal Code Section 5.52.020 is hereby amended to read as follows: 5.52.020 Definitions. In construing the provisions of this chapter, save when otherwise declared or clearly apparent from the context, the following definitions shall be applied: (a) "Year" means calendar year. (b) "Person" means any individual, firm, copartnership, company, corporation, association, receiver, assignee, trustee in bankruptcy, trust, estate, joint venture, club, joint-stock company, business trust, society, or any group of individuals acting as a unit. 9 (c) "Business" includes all activities, occupations, trades, pursuits or professions located and/or engaged in within the city of Yakima, with the object of gain, benefit or advantage to the taxpayer, or to another person or class, directly or indirectly. Each business location shall be deemed a separate business. (d) "Engaging in business" (1) The term "engaging in business" means commencing, conducting, or continuing in any business, and also the exercise of corporate or franchise powers, as well as liquidating a business when the liquidators hold themselves out to the public as conducting such business. (2) This section sets forth examples of activities that constitute engaging in business in the City, and establishes safe harbors for certain of those activities so that a person who meets the criteria may engage in de minimus business activities in the City without having to pay a business license fee. The activities listed in this section are illustrative only and are not intended to narrow the definition of "engaging in business" in subsection (1). If an activity is not listed, whether it constitutes engaging in business in the City shall be determined by considering all the facts and circumstances and applicable law. (3) Without being all inclusive, any one of the following activities conducted within the City by a person, or its employees, agent, representative, independent contractor, broker or another acting on its behalf, constitutes engaging in business and requires a person to register and obtain a business license. (i) Owning, renting, leasing, maintaining, or having the right to use, or using, tangible personal property, intangible personal property, or real property permanently or temporarily located in the City. (ii) Owning, renting, leasing, using, or maintaining, an office, place of business, or other establishment in the City. (iii) Soliciting sales. (iv) Making repairs or providing maintenance or service to real or tangible personal property, including warranty work and property maintenance. (v) Providing technical assistance or service, including quality control, product inspections, warranty work, or similar services on or in connection with tangible personal property sold by the person or on its behalf. (vi) Installing, constructing, or supervising installation or construction of, real or tangible personal property. (vii) Soliciting, negotiating, or approving franchise, license or other similar agreements. (viii) Collecting current or delinquent accounts. (ix) Picking up and transporting tangible personal property, solid waste, construction debris, or excavated materials. (x) Providing disinfecting and pest control services, employment and labor pool services, home nursing care, janitorial services, appraising, landscape architectural services, security system services, surveying, and real estate services including the listing of homes and managing real property. (xi) Rendering professional services such as those provided by accountants, architects, attorneys, auctioneers, consultants, engineers, professional athletes, barbers, baseball clubs and other sports organizations, chemists, consultants, psychologists, court reporters, dentists, doctors, detectives, laboratory operators, teachers, veterinarians. (xii) Meeting with customers or potential customers, even when no sales or orders are solicited at the meetings. (xiii). Training or recruiting agents, representatives, independent contractors, brokers or others, domiciled or operating on a job in the City, acting on behalf, or for customers or potential customers. 10 (xiv) Investigating, resolving, or otherwise assisting in resolving customer complaints. (xv) In-store stocking or manipulating products or goods, sold to and owned by a customer, regardless of where sale and delivery of the goods took place. (xvi) Delivering goods in vehicles owned, rented, leased, used, or maintained by the person or another acting on its behalf. (4) If a person, or its employee, agent, representative, independent contractor, broker or another acting on the person's behalf, engages in no other activities in or with the City but for the following. It need not register and obtain a business license. (i) Meeting with suppliers of goods and services as a customer. (ii) Meeting with government representatives in their official capacity, other than those performing contracting or purchasing functions. (iii) Attending meetings, such as board meetings, retreats, seminars, and conferences, or other meetings wherein the person does not provide training in connection with tangible personal property sold by the person or on its behalf. This provision does not apply to any board of director member or attendee engaging in business such as a member of a board of directors who attends a board meeting. (iv) Renting tangible or intangible property as a customer when the property is not used in the City. (v) Attending, but not participating in a "trade show" or "multiple vendor events." Persons participating at a trade show shall review the City's trade show or multiple vendor event ordinances, where applicable. (vi) Conducting advertising through the mail. (vii) Soliciting sales by phone from a location outside the City. (5) A seller located outside the City merely delivering goods into the City by means of common carrier is not required to register and obtain a business license, provided that it engages in no other business activities in the City. Such activities do not include those in subsection (4). The City expressly intends that engaging in business include any activity sufficient to establish nexus for purposes of applying the license fee under the law and the constitutions of the United States and the State of Washington. Nexus is presumed to continue as long as the tax payer benefits from the activity that constituted the original nexus generating contact or subsequent contacts. (e) "Employee" means any person employed at any business location within the city and/or any person furnishing or performing services within the city, and in addition includes all persons who are self-employed. (f) "Taxpayer" includes any person who engages in business or who is required to have a business license hereunder, or who is liable for any license fee or tax hereunder, or who performs any act, for which a license fee or tax is imposed by this chapter. (Ord. 2837 § 1, 1985: Ord. B-2014 § 2, 1947). Section 2. The City of Yakima Municipal Code Section 5.52.040 is hereby amended to read as follows: 5.52.040 Business located outside city. (1) Threshold exemption. For purposes of the license by this chapter, any person or business whose annual value of products, gross proceeds of sales, or gross income of the business in the City is equal to or less than $12,000.00 and who does not maintain a place of business within the City, shall submit a business license registration to the Director or designee but not pay the business license fee. 11 The threshold does not apply to regulatory license requirements or activities that require a specialized permit. (2) As to businesses located outside the city of Yakima and furnishing or performing services within the city that are not exempt under section (1) above, the license fee or tax herein shall be measured by the number of employees of such business who perform any part of their duties within the city. (Ord. B-2014 § 4, 1957). Section 3. The City of Yakima Municipal Code Section 5.52.050 is hereby amended to read as follows: 5.52.050 Exemptions. In addition to the exemptions outlined in Section 5.52.020(d)(4), the provisions of this chapter shall not apply to: (a) Any person in respect to engaging in any of the following enumerated business activities: franchised electric power, telephone, gas and passenger transportation companies; (b) Fraternal benefit societies as defined by Section 48.36.010 of the Revised Code of Washington; fraternal mutual property insurers as defined by Section 48.36.410 of the Revised Code of Washington; and nonprofit corporations organized under or existing by virtue of Chapter 24.03 of the Revised Code of Washington if such nonprofit corporations provide in their bylaws for the assessment of each member of a fixed sum to be held by the corporation to be paid as death benefits on the death of a member for the purpose of assisting widows, orphans or other persons dependent on a deceased member; (c) Any religious society, association or corporation, through the operation of any hospital, clinic, resort or other institution devoted exclusively to the care or healing of human beings; provided, that no exemption is granted where the income therefrom inures to the benefit of any physician, surgeon, stockholder or individual by virtue of ownership or control of such hospital, clinic, resort or other institution; (d) Auctioneers licensed under Chapter 5.14; (e) Merry-go-rounds licensed under Chapter 5.02; (f) Any instrumentality of the United States, state of Washington, or political subdivision thereof; (g) Any farmer, gardener, or other person who sells, delivers or peddles any fruits, vegetables, berries, butter, eggs, fish, milk, poultry, meats, or any farm product or edibles raised, caught, produced or manufactured by such person within the state of Washington; (h) Any person, who is the holder of a valid permit under Section 8.52.070 of the city of Yakima Municipal Code, engaged in the business of curb number painting and who devotes no more than six hundred hours per year to said business; (i) Newsboys engaged in the sale or delivery of newspapers and magazines or periodicals to the reading public; (j) Any blind person engaged in business activities in the city; (k) Any person, firm or corporation which the city is prohibited from taxing under the laws of the United States or of the state of Washington; (I) Any person meeting the following threshold exemption: For purposes of the license by this chapter, any sole proprietorship without full- or part-time employees whose annual value of products, gross proceeds of sales, or gross income of the business in the City is equal to or Tess than $12,000.00 shall submit a business license registration to the Director or designee but shall not be required to pay the license fee. The threshold does not apply to regulatory license requirements or activities that require a specialized permit. 12 Section 4. Severability. If any section, subsection, paragraph, sentence or clause of this ordinance is declared invalid or unconstitutional for any reason, such decision shall not affect the validity or constitutionality of the remaining portions of the ordinance. Section 5. Effective Date. This ordinance shall be in full force and effect 30 days after its passage, approval, and publication as provided by law and by the City Charter. PASSED BY THE CITY COUNCIL, signed and approved this 16th day of October, 2018. ATTEST: Sonya Claar Tee, City Clerk Publication Date: Effective Date: Kathy Coffey, Mayor 13 5.52.020 Definitions. In construing the provisions of this chaptersave when otherwise declared or clearly apparent from the context, the foliowing definitions shall be applied: (a) "Year" means calendar year. (b) "Person" means any individual, firm, copartnership, company, corporation, association, receiver, assignee, trustee in bankruptcy, trust, estate, joint venture, club, joint-stock company, business trust, society, or any group of individuals acting as a unit. (c) "Business" includes all activities, occupations, trades, pursuits or professions located and/or engaged in within the city ofYakima, with the object of gain, benefitor advantage to the taxpayer, orto another person or class, directly or indirectly. Each business location shall be deemed a separate business. (d) "Engaging in business" (1) The term "engaging in business" means commencing, conducting, or continuing in any business, and also the exercise of corporate or franchise powers, as well as liquidating a business when the liquidators hold themselves out to the public as conducting such business. (2) This section sets forth examples of activities that constitute engaging in business in the City, and establishes safe harbors for certain of those activities so that a person who meets the criteria mav engage in de minimus business activities in the City without having to pay a business Iicense fee, The activities Iisted in this seodonareiUustrohveon|yandarenotintendedtonanmmdhede0nidonof^engauinqinbusinenn^insubseodon (1), If an activity is not listed, whether it constitutes engaging in business in the City shall be determined by considering all the facts and circumstances and applicable Iaw, (3) Without being all inclusive, any one of the following activities conducted within the City by a person, or its employees, agent, representative, independent contractor, broker or another acting on its behalf, constitutes engaging in business and requires a person to register and obtain a business license, (i) Owning, renting, |easing, mointaining, or having the right to use, or using, tangible personal property, intangible personal property, or real property permanently or temporarily located in the City, (ii) Owning, renting, leasing, using, or maintaining, an office, place of business, or other establishment in the City, 14 (iii) SoIicitin sales, (iv) Making repairs or providing maintenance or service to real or tangible personal property, including warranty work and property maintenance. (v) Providing technical assistance or service, including quality control, product inspections, warranty work, or similar services on or in connection with tangible personal property sold by the person or on its behalf. (vi) Installing, constructing, or supervising installation or construction of, real or tangible personal property. (vii) Soliciting, negotiating, or approving franchise, license or other similar agreements. (viii) Collectinq current or deIincuent accounts. (ix) Picking up and transporting tangible personal property, solid waste, construction debris, or excavated materials. (x) Providing disinfecting and pest control services, employment and labor pool services, home nursing care, janitorial services, appraising, landscape architectural services, security system services, surveying, and real estate services including the listing of homes and managing real property. (xi) Rendering professional services such as those provided by accountants, architects, attorneys, auctioneers, consultants, engineers, professional athletes, barbers, baseball clubs and other sports organizations, chemists, consultants, psychologists, court reporters, dentists, doctors, detectives, laboratory operators, teachers, veterinarians. (xii) Meeting with customers or potential customers, even when no sales or orders are solicited atthe meetings. (xiii). TriningorreomitinguAento.venenentahves`independerkuontraotom.bnokemor others, domiciled or operating on a job in the City, acting on behalf, or for customers or potential customers. (xiv) Investigating, resolving, or otherwise assisting in resolving customer complaints. (xv) In-store stocking or manipulating products or goods, sold to and owned by a customer, reqardless ofwhere sale and delivery ofthe goods took place. 15 (xvi) Delivering goods in vehicles owned, rented, leased, used, or maintained by the person or another acting on its behalf, (4) If a person, or its employee, agent, representative, independent contractor, broker or another acting on the person's behalf, engages in no other activities in or with the City but for the following. It need not register and obtain abusiness license. (1) Meeting with suppliers of goods and services as a customer. (ii) Meeting with government representatives in their official capacity, other than those performing contracting or purchasing functions. (iii) Attending meetings, such as board meetings, retreats, seminars, and conferences, or other meetings wherein the person does not provide training in connection with tangible personal property sold bv the person or on its behalf. This rovision does not apiy to any board of director member or aftendee engaging in business such as a member of a board of directors who attends a board meeting. (iv) Renting tangible or intangible property as a customer when the property is not used in the City. (v) Attending, but not participating in a "trade show" or "multiple vendor events." Persons participating at a trade show shall review the City's trade show or multiple vendor event ordinances, where (vi) Conducting advertising throuqh the mali. (vii) Soliciting sales by phone from a location outside the City. (5) A seller located outside the City merely delivering goods into the City by means of common carrier is not required to register and obtain a business license, provided that it engages in no other business activities in the Cltv Such activities do not inciude those in subsection (4) The City expressiy intends that engaginq in business include any activity sufficient to establish nexus for purposes of applying the license fee under the law and the constitutions of the United States and the State of Washington Nexus is presumed to continue as iong as the tax payer benefits from the activity that constituted the original nexus generating contact or subsequent contacts. 16 (e) "Employee" means any person employed at any business location within the city and/or any person furnishing or performing services within the city, and in addition includes all persons who are self-employed. (f) "Taxpayer" includes any person who engages in business or who is required to have a business license hereunder, or who is liable for any license fee or tax hereunder, or who performs any act, for which a license fee or tax is imposed by this chapter. (Ord. 2837 § 1, 1985: Ord. B-2014 § 2, 1947). 17 5.52.O40Business located outside city. (1) Threshold exemption. For purposes of the license by this chapter, any person or business whose annual value of products, gross proceeds of sales, or gross income of the business in the City is equal to or less than $12,000.00 and who does not maintain a place of business within the City, shall submit a business license registration to the Director or desiqnee but shall not pav a business Iicense fee, The threshold does not applv to reQulatory Iicense recuirements or activities that recuire a specialized permit. (2) As to businesses located outside the city of Yakima and furnishing or performing services within the city that are not exempt under section (1) above, the license fee or tax herein shall be measured by the number of employees of such business who perform any part of their duties within the city. (Ord. B-2014 § 4, 1957). 18 5.52.050 Exemptions. In addition to the exemptions outlined in Section 5.52.020(d)(4), tThe provisions of this chapter shall not apply to: (a) Any person in respect to engaging in any of the following enumerated business activities: franchised electric power, telephone, gas and passenger transportation companies; (b) Fraternal benefit societies as defined by Section 48.36.010 of the Revised Code of Washington; fraternal mutual property insurers as defined by Section 48.36.410 of the Revised Code of Washington; and nonprofit corporations organized under or existing by virtue of Chapter 24.03 of the Revised Code of Washington if such nonprofit corporations provide in their bylaws for the assessment of each member of a fixed sum to be held by the corporation to be paid as death benefits on the death of a member for the purpose of assisting widows, orphans or other persons dependent on a deceased member; (c) Any religious society, association or corporation, through the operation of any hospital, clinic, resort or other institution devoted exclusively to the care or healing of human beings; provided, that no exemption is granted where the income therefrom inures to the benefit of any physician, surgeon, stockholder or individual by virtue of ownership or control of such hospital, clinic, resort or other institution; (d) Auctioneers licensed under Chapter 5.14; (e) Merry-go-rounds licensed under Chapter 5.02; (f) Any instrumentality of the United States, state of Washington, or political subdivision thereof; (g) Any farmer, gardener, or other person who sells, delivers or peddles any fruits, vegetables, berries, butter, eggs, fish, milk, poultry, meats, or any farm product or edibles raised, caught, produced or manufactured by such person within the state of Washington; (h) Any person, who is the holder of a valid permit under Section 8.52.070 of the city of Yakima Municipal Code, engaged in the business of curb number painting and who devotes no more than six hundred hours per year to said business; (i) Newsboys engaged in the sale or delivery of newspapers and magazines or periodicals to the reading public; 19 (j) Any blind person engaged in business activities in the city; (k) Any person, firm or corporation which the city is prohibited from taxing under the laws of the United States or of the state of Washington; (U Any person operating ubuoinc-:solo proprictorship without full or part time empioyec, who devotes Any person meeting the following threshold exemption: For purposes of the license by this chapter, any sole proprietorship without full- or part-timeemp|oveeowhooe annual value of products, gross proceeds of sales, or gross income of the business in the City is equal to or less than $12,000.00 shall submit a business license registration to the Director or designee but shall not be required topay the license fee. The threshold does not apply to regulatory license requirements or activities Mhatrequireaopeoia|izedperni\(]vd.0%'73§1.100%:Ovd.%373§3.100O:Ovd.1837§3.1074:Ovd.B' 3055. 1957: Ord. B'3O14§5. 1057). 20 Final city business license model threshold Contact: Victoria Lincoln, Andrew Pittelkau, Sheila Gall Business license and city B&O tax simplification In the 2017 session, EHB 2005 (RCW 35.90) passed requiring three actions by cities with business licenses and local B&O taxes. The law: 1. Requires cities with business licenses to establish a workgroup to create a model business license with a licensing threshold by July 2018 for adoption by all business license cities by January 1, 2019; 2. Requires all cities with business license to administer their business license through the state's Business Licensing System (BLS) by 2022 or FileLocal by 2020; and 3. Establishes a task force on local B&O tax service apportionment under RCW 35.102.130 to report to the Legislature by October 2018. Final model ordinance for local business licenses — minimum threshold Cities were required to develop a model ordinance for business licensing by July 1, 2018. The ordinance includes a mandatory definition of "engaging in business" and a minimum threshold (or occasional sale) exemption to establish when out-of-town or transient businesses are required to be licensed. All business license cities must adopt it by the end of the year (RCW 35.90.080). What is in the model? The model threshold has two pieces: a model threshold and a definition of "engaging in business." 1. The model business license threshold language would: • Apply a minimum threshold of $2,000 per year in the city for businesses that do not have a location in the city; • Require a license for businesses with a location in the city without regard to the threshold; • Allow cities the option to require registration with no fee for businesses under the threshold; and • Only apply to general business licenses, not regulatory licenses or local taxes. 2. The definition of "engaging in business" includes examples of what constitutes business activities in cities that would subject a business to license requirements, as well as those activities that would not. The model language is adapted from the definition that the 45 cities with local B&O taxes have already adopted for the definition of "engaging in business" in the B&O tax model ordinance. What are the deadlines for all cities with business licenses to adopt the model? Cities with a business license must adopt the model by January 1, 2019. However, cities that currently partner with the state's Business Licensing Service (BLS) for business licensing administration have a deadline of October 17, 2018, because they must provide BLS 75 -day notice of any changes to their business licenses (including this mandatory change). Where can I learn more about implementing the threshold? AWC is hosting a webinar to tell you everything you need to know to comply with the mandatory model threshold. Prepare to streamline your business license August 8 at 10 am 1 Webinar AWC also held a presentation on this topic at its Annual Conference in June and will present at the WFOA Annual Conference on September 19 and EWFOA on October 12. What happens if we don't enact the threshold by the deadline? RCW 35.90.090 provides that a city cannot enforce its business license after January 1, 2019, until it has adopted the mandatory threshold. RCW 35.90.090: "A city that has not complied with the requirements of this section by January 1, 2019, may not enforce its general business licensing requirements on any person until the date that the mandatory provisions of the model ordinance take effect within the city." What if my city wants a higher threshold? Cities can choose to enact a higher threshold. The $2,000 threshold level per city per year for out -of - city businesses is the minimum level that every city must enact. How was the business license threshold developed? Section 8 of EHB 2005 required cities to work through the Association of Washington Cities (AWC) to develop a model business license threshold by July 1, 2018 with a focus on determining a threshold for when a license should be required for out -of -city businesses. The bill also required input from the business community. AWC convened a task force of city business license officials to begin drafting a model license threshold in August 2017. The group met monthly in person or via conference call to research city business license systems and existing options for establishing a model threshold and to review feedback on the proposed model from cities and the business community. AWC sent a survey to cities last fall on preferences for approaching the 21 model threshold and sent a draft for review to cities in March 2018. In April -June 2018, AWC sent drafts of the model to the business community for comment, and the task force met in person with business community representatives. In response to business community concerns about the level of the threshold, the committee proposed doubling its initial proposed level to $2,000 per year in the city for businesses without a location in the city. The committee agreed to review the threshold level in four years when the model B&O tax model ordinance will also be due for review and more information on impacts of the license threshold is known. In late June, the committee finalized the model language. Business license model threshold implementation timeline July 2017 — EHB 2005 takes effect August 2017 — First meeting of city workgroup July 1, 2018 — Deadline for city work group to develop model ordinance with minimum threshold to get a license August 8, 2018 — AWC webinar on implementing model threshold October 17, 2018 — Deadline for current BLS partner cities to adopt model minimum threshold and notify DOR of changes to business license for threshold adoption (Cities on BLS plan but not yet onboarded would have later deadline of January 1, 2019) January 1, 2019 — Deadline for all other cities to adopt model minimum threshold How many cities does this impact? More than 230 cities issue local business licenses. Where can I find more information on the Business Licensing Service or FileLocal? Business licensing service: citypartners.dor.wa.gov FileLocal: filelocal.orq 22 What about the provision of EHB 2005 and the scope of work for the B&O service apportionment task force? The two -factor formula for B&O tax service apportionment was required by RCW 35.102.130, effective in 2008. The two factors, payroll and service income, have complicated multi -part tests to determine how much of business service revenues should be apportioned to a city. EHB 2005 created a seven -member task force to make recommendations to simplify two -factor service apportionment by October 2018 with the following members: • One Department of Revenue, non-voting chair • Three cities with local B&O taxes • Three business representatives The task force has been meeting monthly since August 2017, and the deadline by which it must submit a report to the Legislature is October 31, 2018. The city representatives are: • Chris Bothwell, Lake Forest Park • Joseph Cunha, Seattle • Danielle Larson, Tacoma How did this legislation come about? During the 2016 legislative session, lawmakers passed HB 2959, establishing a task force to evaluate options to continue local business tax and licensing simplification. On December 30, 2016, the task force released its final report on local tax and licensing simplification with four main recommendations. The task force did not recommend that all cities with a business license be required to participate in the state's Business Licensing Service, nor did it recommend any centralized collection of city B&O tax at the state level. However, some of the items recommended represented a significant compromise on the part of cities. Where can I find more information on the 2016 task force? The report included four recommendations related to licensing, establishing a business license threshold, recommending a task force on service income apportionment, and providing for data sharing between DOR and FileLocal. Read the full report.