People who rent out their homes in San Luis Obispo and who don’t have a business license and tax certificate could face daily penalties if they do not come into compliance with a new city crackdown.
City officials say they will mail 3,900 enforcement letters later this month to property owners who appear to be renting homes without maintaining a required business tax certificate and license.
Those property owners will be given about a month to comply. If they do not, city officials say they will issue administrative citations up to $500 a day after the third straight day of non-compliance.
The city expects to gain about $80,000 annually by enforcing the law. The administrative citations would be a last resort, said Jennifer Thompson, revenue supervisor.
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Last year, the city collected $120,000 in business tax and license revenue from residential rentals, so the enforcement could boost that as much as two-thirds.
That money goes into the general fund for city services such as police and fire protection and street maintenance.
City officials say they were surprised by the large number of homeowners who appear not to have a valid business tax certificate.
The review is part of a business license verification program that the city undertakes each year. The business licenses are divided into five categories — making it a five-year stretch between reviews.
“It was shocking to us,” city Finance Manager Debbie Malicoat said. “It is definitely a bigger issue than we originally anticipated.”
It is possible, Malicoat said, that property owners are unaware that the city requires the tax certificate because other cities do not. The ordinance has been in place in San Luis Obispo since 1991.
Rental property owners pay 50 cents for each $1,000 in gross receipts annually. Any gross rental income less than $50,000 is levied a standard $59 annual tax.
The purpose of the enforcement is to make sure business owners pay their equitable share of taxes, Malicoat said.
“We are doing what we can to ensure universal compliance,” Malicoat said. “This is not a new requirement.”
The letter is to be mailed Aug. 23, and recipients would have two weeks to comply before a second letter is issued.
There is a $68 application fee for the business tax certificate. Typically, the city also charges one year in retroactive fees for businesses that have operated without a valid business license and tax certificate.
However, the city is waiving the retroactive fees in order to gain as much compliance as possible, Malicoat said.
Reach AnnMarie Cornejo at 781-7939. Stay updated by following @a_cornejo on Twitter.