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ORD 92-10 B & O TAX AND LICENSES50 ORDINANCE No. 92 - 10 AN ORDINANCE OF THE CITY OF BAINBRIDGE ISLAND, WASHINGTON, RELATING TO THE CITY'S BUSINESS & OCCU- PATION TAX AND BUSINESS LICENSES; REPEALING CHAPTER 5.04 OF THE CITY'S MUNICIPAL CODE AND ADDING A NEW CHAPTER TO TITLE 5 OF THE CITY'S MUNICIPAL CODE. WHEREAS, since 1982, the City of Bainbridge Island has had an ordinance requiring the licensing of businesses and taxing the gross income of persons doing business within the City; and WHEREAS, the City desires to levy a business & occupation tax which is fair to all and is within the limits on such taxation of .0020 imposed by RCW 35.21.710; and WHEREAS, the City desires to provide for a referendum procedure to apply to this ordinance pursuant to RCW 35.21.706; and WHEREAS, the City desires to make the calculation and payment of the business and occupation tax as simple as possible for all persons required to pay the tax; now, therefore, THE CITY COUNCIL OF THE CITY OF BAINBRIDGE ISLAND, WASHINGTON, DO ORDAIN AS FOLLOWS : SECTION 1. REPEALER. This ordinance repeals Chapter 5.04 of the Bainbridge Island Minicipal Code. SECTION 2. NEW CHAPTER. There is added to Title 5 of the Bainbridge Island Municipal Code a new chapter entitled "Business and Occupation Tax" containing the provisions set out in Sections 3 through 23 of this Ordinance. SECTION 3. PURPOSE. The provisions of this chapter are an exercise of the police and taxation powers of the City to license for revenue purposes and to govern the privilege of engaging in business in the City. SECTION 4. DEFINITIONS AND PRESUMPTION. A. This chapter incorporates by reference all definitions set forth in Chapter 82.04 RCW, hereafter amended, except where a conflicting definition is stated in this chapter. B. "Director" means the Director of Finance and Administrative Services for the City. C. Businesses or persons soliciting business within the City or using either a business telephone number or business address within the City shall be presumed to be engaged in business within the City. 51 ORDINANCE 92 - BUSINESS AND OCCUPATION TAX PAGE D. Businesses that are certified by the Internal Revenue Service of the United States as being exempt from federal income taxation shall be presumed to not be engaged in business. SECTION 5. LICENSE REQUIRED. On or after April 1, 1992, every person who engages in business activities within the City shall apply for and obtain from the Director a license for the privilege of engaging in business within the City for each calendar year or portion thereof. The fee for the business license shall be in the amount established by resolution of the City Council. No person shall engage in any business for which a business license is required under this Chapter without being so licensed, regardless of the amount of income received, except as otherwise provided in this Title. SECTION 6. LICENSE - APPLICATION AND ISSUANCE. A. Business licenses must be obtained and the fee paid before the last day of February, or 60 days after a business commences operation within the City, whichever occurs first. The license fee shall be considered delinquent if not paid when due. B. The business license required by this chapter shall expire on December 31st of the year for which it is issued. A new license shall be required for each year. C. Applications for business licenses shall be made to and issued by the Director on forms provided by the City, which shall state the residence of the applicant, the nature of each business activity in which the applicant desires to engage, and the place where the applicant proposed to conduct its business. If the Director finds that the application is complete and correct, the business license shall be issued upon payment of the required fee. SECTION 7. LICENSE - NONTRANSFERABLE. The business license issued under this Chapter shall be personal and nontransferable, and shall at all times be posted in the place of business for which it is issued. Where a licensee's place of business is changed, the licensee shall return the license to the Director and a new license shall be issued for the new place of business without charge. No licensee shall allow another person to operate a business under, or display, the license, nor shall another person operate under or display the license. SECTION 8 - REVOCATION. A. A business license issued pursuant to this chapter may be revoked by the City for cause or upon conviction of the licensee of a violation of ordinance or statute in a court of competent jurisdiction. A business license shall not be revoked under this paragraph unless the Hearing Examiner has held an administrative public hearing pursuant to the Code. Written notice of the public hearing under this section shall be made to the licensee in writing at least 20 days in advance of the hearing by mailing ORDINANCE 92 - BUSINESS AND OCCUPATION TAX PAGE 52 the notice to the address listed on the license application. Upon proof satisfactory to the hearing examiner that the licensee had been convicted of a violation of an ordinance or statute or that there is cause for revocation, the business license shall be revoked and the licensee shall cease doing business within the City. An appeal of the hearing examiner's determination pursuant to the Code shall stay the revocation of the business license until a final decision is rendered. B. A business license may be revoked without a public hearing on 20 days written notice to the licensee where the licensee fails to pay the annual license fee and/or business and occupation tax, together with any penalties due thereon, within six months after the fee or tax is due and owing. The licensee shall have the right to full reinstatement of the business license upon payment of all amounts due within 10 days of the revocation. SECTION 9. LICENSE - MULTIPLE LOCATIONS. If business is transacted by one person at two or more separate locations within the City, a separate license shall be obtained and displayed in each location at which business is transacted. SECTION 10. PERSONS SUBJECT TO TAX - AMOUNT. A. On and after April 1, 1992, there is levied upon and shall be collected from every person, for the act or privilege of engaging in business activities within the City, in addition to the business license fee a business and occupation tax per calender year, or any portion thereof, except as otherwise provided in this Title. The business and occupation tax shall be in the amount of one-tenth of one percent of the amount of gross income subject to tax by the State of Washington pursuant to Chapter 82.04 RCW, as hereafter amended, for business activities occurring within the City. SECTION 11. EXEMPTIONS - TYPE OF INCOME. The following types and sources of income shall not be included in the gross income subject to the tax imposed by this Chapter: A. All types and sources of income, revenue, proceeds or receipts which are exempt from the business and occupation tax imposed by the State of Washington pursuant to Chapter 82.04 RCW, as hereafter amended; B. Gross income derived from the operation of a commercial parking lot business and which is subject to the commercial parking lot tax inposed in this Title; C. Gross income or proceeds derived from liquor, as defined by RCW 66.04.010(15), motor vehicle fuels, and any other business or item which is not subject ro taxation by the City pursuant to state law; D. Gross income of any telephone business; 53 ORDINANCE 9 2 - BUSINESS AND OCCUPATION TAX PAGE 4 E. Gross income of a temporary stationary business as defined in Chapter 5.40 BIMC; and F. Gross income, revenue, proceeds or receipts which are subject to taxation by any other city. SECTION 12. AMOUNT OF INCOME TAXED. A. The business and occupation tax shall only be imposed if the gross income of the person exceeds $250,000 per year. Persons with gross income exceeding $250,000 per year shall be taxed only on the amount of gross income exceeding $250,000. Only one such exemption shall be allowed to any group of businesses under common ownership. For the purposes of this chapter, businesses shall be considered to be under common ownership if ten percent or more of the ownership of the business is held or controlled by the same person or persons. B. If a person operates a business for less than a full year, the amount of gross income exempted from the business and occupation tax shall be reduced proportionately. SECTION 13. LIMITS ON TAXATION. Washington law limits the amount of tax which a city may levy on a person. The tax imposed by this chapter is within those limits at the time this chapter is enacted. If in the future the rates imposed by this chapter exceed statutory limits, the taxes imposed by this chapter shall be automatically reduced to the highest legal rate. SECTION 14. TAXES - APPORTIONMENT A. STATEMENT OF PRINCIPLE. It is the intent of this chapter that a person pay a tax no more than once to local government on manufacturing and selling the same product. No deduction is allowed for the payment of taxes to the State of Washington or for the payment of dissimilar fees or taxes. If the imposition of the City's business and occupation tax would place an undue burden upon interstate commerce or violate constitutional provisions, a person shall be allowed a deduction to the extent necessary to preserve the validity of the City's tax. The taxpayer may deduct from gross income or receipts the value of goods manufactured inside the City and sold outside the City in those cases where the goods are sold outside the State of Washington and are subject to a gross income or receipts tax where the tax is not separately stated from the sales price or where the goods are sold in any foreign country. B. PERSONS RENDERING SERVICES INSIDE AND OUTSIDE THE CITY. Persons who render services both inside and outside the City and who maintain an office or place of business within the City and not elsewhere, shall be taxed on the gross income from the business without regard to the place where the business is conducted. Persons who render services both 54 ORDINANCE 9 2 - BUSINESS AND OCCUPATION TAX PAGE inside and outside of the City and who maintain an office or place of business both inside the City and outside the City, or who have no office or other place of business within the City, shall have the option, for purposes of limiting their tax liability to the City under this chapter, of apportioning to the City that portion of gross income derived from services rendered within the City. If the person cannot readily determine the portion of gross income derived from services rendered within the City, the person shall apportion to the City that portion of total income which the cost of rendering services within the City bears to the total cost of rendering services both inside and outside of the City. C. PERSONS ENGAGED IN BUSINESS ACTIVITY OTHER THAN RENDERING SERVICES. Any person who is subject to tax under this chapter and who has no office, store or other place of business within the City, shall allocate to the City the gross proceeds of all sales in which the person's business activity within the City is either a determining element in the transaction or a predominant factor in making or holding the market in the City. Conversely, a person who engages in business using an office, store or other outlet within the City and maintains no equivalent facility elsewhere in Washington, may deduct the gross proceeds of sales which (1) are used by another Washington city to calculate a license fee or tax measured by gross receipts, and (2) reflect business activity conducted in the taxing city that is either a determining element in the transaction or a predominant factor in making or holding the taxpayer's market in that city. A person who engages in business using stores, offices, or outlets both within the City and outside of the CIty may allocate the gross proceeds of sales to the store, office or outlet where the predominant selling activity occurs. D. ALLOCATION AUTHORITY OF DIRECTOR. To prevent or reduce overlapping municipal taxation, the Director is authorized to (1) agree with one or more Washington cities for a joint audit of a person, and for the reciprocal application of common principles or policies consistent with the provisions of this chapter relating to the allocation or apportionment of the gross proceeds of sales, gross receipts, or gross income with respect to any person; and (2) as part of an inter-city agreement, or in concert with other Washington cities, include or implement reciprocal policies and procedures, consistent with this chapter, to ensure that this City and the other cities receive the tax payments each city is due when a person in good faith has overpaid municipal taxes measured by the person's gross proceeds of sale, gross receipts, or gross income to either city when such overpayments are due both to this City and the other cities. E. RECORDS. Each person who elects to apportion his gross receipts or gross income shall keep for five years all records reflecting the amount of his value of products, gross proceeds of sale, or gross income or gross receipts of business, as the case may be. Such records shall be open at all reasonable times to the inspection of the Director, or his duly authorized agent, for the verification of the person's tax returns. F. EFFECT OF APPORTIONMENT ON TAX EXEMPTION. All persons electing to ORDINANCE 92 - BUSINESS AND OCCUPATION TAX 55 PAGE apportion their income or gross revenue shall also reduce the amount of the income exempt from taxation, as defined under this chapter, by the same proportion as the proportion of income derived from or attributed to sources outside the City. SECTION 15. PAYMENT OF TAX. A. Payment of the tax imposed by this chapter shall be due on or before the last day of January of the year following the tax year. B. On or before the due date, every person required to pay a license fee or a tax as set forth by this chapter shall file with the City a written return, upon such form and including such information as the Director shall require, together with the payment of the amount of the tax. Payment shall be accompanied by either copies of the pages of the Washington State tax return showing the amounts subject to business and occupation tax by the State of Washington, or an affidavit of either the owner or an authorized officer of the business certifying the amount of income subject to business and occupation tax by the State of Washington. In any instance in which the documents mentioned in this paragraph do not allow the ready calculation of the amount of tax due the City, the Director may also require the person to file a written return, upon such form and setting forth such information as the finance director may reasonably require in order to determine the amount of tax due to the city. C. The Director shall have the right to require proof of gross income or gross receipts. Upon supplying the Director with the Washington State tax returns filed with the Department of Revenue for the State of Washington and the city tax returns filed with the responsible city officials for all cities for which apportionment deductions are claimed for the period of time in question, the person shall be deemed to have made a prima facie showing of proof of the person's gross income or gross receipts. D. If payment of any tax due is not received by the City by the last day of the month in which the tax becomes due, such payment shall be considered delinquent. SECTION 16. LICENSE - FEE ADDITIONAL TO OTHERS. The license fee and business and occupation tax imposed and levied by this chapter shall be in addition to any license fee or tax imposed or levied under any law or other ordinance of the City, except as otherwise expressly provided in this chapter. SECTION 17. LICENSE & TAX - COLLECTION. The license fee and tax imposed by this chapter, and all penalties thereon, shall constitute a debt to the City, and may be collected by court proceedings in the same manner as any other debt in like amount, which remedy shall be in addition to all other existing remedies. Any judgment entered in favor of the City shall include an award to the City of all court and collection costs 56 ORDINANCE 92 - BUSINESS AND OCCUPATION TAX PAGE 7 including attorneys' fees. Amounts delinquent more than ninety days may be assigned to a third party for collection, in which case the amount of any collection charges shall be in addition to all other amounts owed. Amounts due shall not be considered paid until the City has received good funds for the full amount due or has discharged the amount due and not paid. SECTION 18. OVER OR UNDERPAYMENT OF TAX. In the event that any person makes an overpayment, and within two years of the date of such overpayment makes application for a refund or credit, the person's claim shall be allowed and a refund made by the City upon determination by the Director that no other sums are owed by the person to the City. If a person determines that the tax has been underpaid and without notice by any party pays the amount due to the City, the amount underpaid and corrected by the person shall not be subject to penalty. SECTION 19. CIVIL PENALTY. In the event that any person fails to pay the license fee and/or tax imposed by this chapter within 15 days of the due date, a civil penalty shall be imposed in the amount of ten percent (10 %) of the delinquent license fee and or tax plus any previously assessed and unpaid penalties under this chapter. For the purposes of calculating the penalty, each month that the amounts owed under this chapter are due and unpaid shall be considered a separate violation subject to penalty. A fraction of a month shall be deemed a full month. In no event shall the penalty for a fee or tax delinquent more than ninety days be less than $50.00. In the event that a penalty has been wrongfully collected, the penalty shall be refunded by the Director. SECTION 20. VIOLATION - PENALTY. A. It shall be a violation of this chapter: (1) for a person required to obtain a business license or pay a tax under this chapter to fail or refuse to secure the business license or to fail to pay the fee or tax imposed; (2) for a person to make any false representation in connection with application for a business license under this chapter; (3) for a person to evade payment of the fee or tax, or any part thereof; (4) for a person to fail to appear and/or refuse to testify in response to a subpoena issued hereto; (5) for a person to testify falsely upon any investigation of the correctness of a return, or upon the heading of any appeal; or (6) for a person to in any manner hinder or delay the City or any of its officers in carrying out the provisions of this chapter. 57 ORDINANCE 92 - BUSINESS AND OCCUPATION TAX PAGE B. It shall be unlawful for any person to conduct business within the City limits when not in compliance with this chapter. C. A person violating any of the provisions of this chapter, upon conviction thereof, shall be punished by a fine of not more than $500 or by imprisonment for not more than six months, or by both such fine and imprisonment. Each such person is guilty of a separate offense for each and every day during the portion of which any violation of any provision of this chapter is committed, continued or permitted by any such person and he is punishable accordingly. SECTION 21. APPEAL PROCEDURE. A person aggrieved by the amount of the license fee or tax determined to be due to the City by the Director under the provisions of this chapter may appeal to the City Council from such determination by filing a written notice of appeal with the City Clerk within 20 days from the date on which such person is given notice of the license fee or tax. The City Council shall, as soon as practicable, fix a time and place for the hearing for such appeal. Notice of the hearing shall be given to the appellant by certified mail at least five days prior to the date of the hearing. SECTION 22. LICENSE - CONFIDENTIALITY OF APPLICATIONS & TAX RETURNS. The applications and tax returns made to the City pursuant to this chapter shall not be made public, nor shall they be subject to the inspection of any person who is not an employee of or under contract to the City and then only when such persons are acting in an official capacity. It shall be unlawful for any person to make public or to inform any other person as to the contents of a license application or tax return, to permit inspection of an application except as authorized in this section or as required by law. This section shall not be construed to prohibit disclosure of information received under this chapter to the Federal Internal Revenue Service, State Department of Revenue, or to any other city in this state for official purposes only; and this section shall not be construed to prohibit or make unlawful the disclosure of the name and address of any person licensed under this chapter, or of any person signing an application on behalf of an applicant. SECTION 23. DUTIES OF THE DIRECTOR. A. The Director shall keep full and accurate records of all funds received under the provisions of this chapter. Upon receipt of any license fee, tax, or penalties collected under the provisions of this chapter, the Director shall deposit the amounts collected into the current expense fund of the City. ORDINANCE 92 - BUSINESS AND OCCUPATION TAX PAGE 9 B. In order to carry out the provisions of this chapter, the Director shall have the power to adopt, publish and enforce rules and regulations consistent with this chapter. C. The Director for good cause shown may extend the time for making and filing any tax return as required under this chapter; provided, that any extension in excess of 30 days shall be conditioned upon payment of interest of 1% for each thirty days or portion thereof on the amount of tax from the date upon which the tax became due. SECTION 24. For the year 1992 only, the following shall apply: A. The tax levied upon and collected from every person for the act or privilege of engaging in business activities within the City, for the months of January 1992 through March 1992, shall be computed and paid as provided in Chapter 5.04 BIMC in force until this ordinance takes effect except that the dollar amount of gross income referred to in Chapter 5.04.030(C) BIMC shall be $12,500. The tax due to the City for the months of January, 1992 through March 1992 shall be delinquent if not paid on or before April 30, 1992; and B. The tax levied upon and collected from every person for the act or privilege of engaging in business activities within the City, for the months of April 1992 through December 1992, shall be computed and paid as provided in this ordinance; provided, that the tax levied and collected shall be in the amount of one-tenth of one percent of the amount of gross income for the months of April 1992 through December 1992 subject to tax by the State of Washington pursuant to Chapter 82.04 RCW, as hereafter amended, for business activities accuring within the City. In computing the gross income subject to tax by the State of Washington pursuant to Chapter 82.04 RCW, any deductions taken must relate to gross income for the months April 1992 through December 1992; and C. The tax imposed by this ordinance on gross income for the months of April 1992 through December 1992 shall only be imposed on the amount of gross income for the months of April 1992 through December 1992 which exceeds $175,000. SECTION 25. REFERENDUM PROCEDURE. A referendum petition with respect to this ordinance may be filed with the city clerk within seven days of the passage of this ordinance. The referendum procedures set forth in RCW 36.17.240 through 35.17.360, as hereafter amended, shall apply, with the following additions and amendments as required by RCW 25.21.706: A. Within ten days of the filing of the petition, the city clerk will confer wtih the petitioner concerning the form and style of the petition, issue and identification number, and secure an accurate, concise and positive ballot title from the city attorney; 59 ORDINANCE 92 - BUSINESS AND OCCUPATION TAX PAGE 10 B. The petitioner shall have thirty days in which to secure the signatures of not less than 15% of the registered voters of the city, as of the last municipal general election, upon petition forms which contain the ballot title and full text of the measure to be referred; and C. The city clerk shall verify the sufficiency of the signatures on the petition, and if sufficient valid signatures are properly submitted, shall certify the referendum measure to the next election ballot within the city, or at a special election ballot as provided pursuant to RCW 35.17.260(2). SECTION 26. This ordinance shall be effective on April 1, 1992. PASSED by the City Council this 19th day of March, 1992. APPROVED by the Mayor this 19th day of March, 1992. ATTE S T/AUTHE NT I CATE: RALPH W. EELLS, Finance Director APPROVED AS TO FORM: ROD P. KASEGUMA, City Attorney FILED WITH THE CITY CLERK: MaFch 13, 1992 PASSED BY THE CITY COUNCIL: March 19, 1992 PUBLISHED: MaFch 23 & 25, 1992 POSTED: MaFch 23, 1992 EFFECTIVE DATE: April 1, 1992 ORDINANCE 92 -