When health orders were put in place to slow the spread of COVID-19 in 2020, many business owners feared drowning in expenses while they were forced to shutter. In an attempt to stave off closures, though, the city suspended the collection of business license tax and fees, which typically generates tens of millions of dollars in revenue annually.
Collection of the tax and fees is now expected to resume early next year, with businesses facing penalties if they do not pay in full or set up a “flexible” payment plan, according to city staff.
“The city is working hard to provide relief and other supportive programs for the business community to assist with factors impacting the ability for businesses to thrive,” Tara Mortensen, business services bureau manager in the city’s Department of Financial Management, said in an email. “Business License taxes and fees should be of low impact to a business.”
The city is targeting sometime during the first quarter for the resumption of collection, Mortensen said.
Each year, every one of the city’s thousands of businesses pays business license fees and taxes, which total upward of $24 million in annual revenue for Long Beach’s general fund, according to a city memo.
As of Tuesday, there were 36,825 business licenses and permits, according to Mortensen, who noted many businesses have more than one license and/or permit.
Business owners are required to renew their license each year to legally operate in the city. Taxes and fees vary based on business type, with a base rate of $252.84 for home-based businesses and independent contractors, and $412.26 for most other operations located in commercial space.
Additional fees are then added to the base rate, such a fee ranging from $10.69 to $32.08 per employee depending on business type.
Other miscellaneous business types forego the normal base fee and instead pay a tax more specific to their operation. For example, a bowling alley (which Long Beach does not currently have) or pool hall would pay $152.68 per lane or table, respectively.
All business license applications also are subject to a $4 state-mandated ADA fee.
Other regulatory fees for certain businesses as well as business improvement district fees also are collected with the business license taxes and fees, Mortensen noted.
Despite the challenges of the pandemic, many businesses were able to keep their accounts with the city up to date, Mortensen said, with only about 12% of business license accounts being past due for more than one year. The city does not have exact total for the amount that is outstanding, she added.
Late fees and penalties, which also have been deferred since March 2020, also will return early next year, Mortensen said. After an amount is 30 days past due, there is a 25% penalty of the total amount, with an additional 10% of the principal for each subsequent month until it reaches twice the original amount.
Outreach to delinquent businesses, however, is already underway, with account statements being mailed to owners, Mortensen said. Owners will have the option to pay the amount in full or sign up for an interest-free payment plan.
“As long as businesses remain current with their payment plan, no penalties will be assessed,” Mortensen said.
For businesses that permanently closed amid the pandemic, Mortensen said there is a collections process to address delinquent accounts. The city is actively working to collect closure data and will adjust accounts according to when the business actually closed, so as not to charge for time they were not operating, she said.
Other than deferring payments and penalties throughout the pandemic, the city also has offered businesses financial assistance in the form of grants. The first round used an application process to reimburse business license, health permit and fire permit account fees for 119 businesses in 2020 totaling $279,690, according to a memo.
Another estimated $2.2 million in grants is expected to be distributed to delinquent accounts using a criteria formula to identify businesses, the memo states.
“The city’s intention,” Mortensen said, “is to continue providing support and assistance to businesses in need to aid recovery from the pandemic.”
For business license account information, email LBBiz@longbeach.gov or call 562-570-6211. For business technical assistance, 4biz@longbeach.gov or call 562-570-4249. More information can be found on the city’s website.