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Home My WebLink AboutCC 02-03-2026 Item No. 9 Business License Amnesty Program_Supplemental ReportCC 2-03-2026 #9 Business License Amnesty Program Supplemental Report 1 ADMINISTRATIVE SERVICES DEPARTMENT CITY HALL 10300 TORRE AVENUE • CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3220 CUPERTINO.GOV CITY COUNCIL STAFF REPORT SUPPLEMENTAL 1 Meeting: February 3, 2026 Agenda Item #9 Subject Transition of Business License Administration to HdL Companies and consideration of a Business License Amnesty Program Recommended Action Receive a report on the transition of phased business license administration to HdL Companies and provide direction on whether to adopt a business license amnesty program. If Council elects to proceed with amnesty, select one of the three options presented below. The details, benefits, and tradeoffs of each option are discussed below. 1.Adopt a 30-day citywide business license amnesty period prior to initiation of HdL’s compliance and discovery efforts; 2.Provide ongoing amnesty upon discovery for newly identified unlicensed businesses; or 3.Adopt a phased 60-day business license amnesty program (staff recommendation) consisting of 100% penalty forgiveness during the first 30 days and 50% forgiveness during the subsequent 30 days, followed by full enforcement. Background: Staff’s responses to questions received from councilmembers and those that staff would like to clarify are shown in italics. Q1: The staff report mentions penalties for not having a business license. What is the penalty? Does the penalty apply to the current business year or all past years? I would recommend a fourth option for the Business License compliance project: This approach offers citywide penalty forgiveness to all previously unlicensed businesses: 100% forgiveness in the first 60 days. After the 60 -day period, HdL would begin full discovery enforcement and resume standard penalties after 30 days. Many small businesses in our city might not realize that they are subject to a business license tax, even if there is outreach 2 from the City. I think that there should be an amnesty provided for those businesses that are discovered by HdL. Separately, how would the City treat businesses that are dormant? Staff Response: Penalties for business license noncompliance are assessed monthly at a rate of 20% of the base tax, up to a maximum of 100% (MC5.04.250). In addition to the penalty, the interest is assessed at 1% per month on the principle of unpaid tax. These penalties and interest apply only to the current and up to three prior years of unpaid license taxes. If Council adopts an amnesty program, existing businesses that are out of compliance , whether they failed to apply or failed to renew, would be eligible to participate. As proposed, the City would waive all penalties and only seek recovery of up to three years of back taxes during the amnesty window. This approach encourages voluntary compliance, particularly for small or home-based businesses that may have been unaware of the requirement BL Amnesty Program, The treatment of dormant businesses would likely depend on whether the business has ceased operations entirely or is simply inactive. These situations would be reviewed individually through the compliance process and handled appropriately in coordination with HdL. Council can, of course, choose any options being presented or suggest a new option that is not listed in the staff report. Q2: What is a business? I went to the City website and could not easily find an answer. https://www.cupertino.gov/Business-and-Development/Business/Business -License-User- Guide Then I went to the new website and still could not find an answer. https://cupertino.hdlgov.com/. If someone sells $1000 in goods on eBay a business? What about $10,000 or more? If someone does pro-bono work, it is a business? What if someone is selling home-made crafts at the local farmers’ market and makes a $500 profit? This is one of the reasons that I think that we need a longer runway for compliance. By the way, I had asked the previous City Attorney that when the City makes contracts with businesses that we should check for their business licenses. We check for other things, like insurance. He refused. Will the City start checking that businesses that it enters into contract with are paying a business license tax? Staff Response: The City defines a "business" broadly as any activity carried on for the purpose of earning income, whether for profit or not, and regardless of the size or formality of the operation (MC 5.04.030 B). This includes home-based businesses, independent contractors, online sellers, gig workers, and those participating in temporary or seasonal sales. Pro-bono work would generally not constitute a business, as it does not generate income. However, some activities that appear informal or part-time may still fall under the business license requirement. That said, it is not practical to expect all remote employees or hobbyists to register individually; current industry practice treats them as employees of the physical place of business. 3 Staff will provide clarification through municipal code updates later this year. Additionally, Staff created FAQ questions (available on the City’s Business License webpage, linked here: https://www.cupertino.gov/Business-and-Development/Business/Business-License-User-Guide) to address ambiguity in the interim. As for compliance runway, staff agrees with the need for fair and accessible outreach. The proposed amnesty program provides a time-limited opportunity for businesses to register without penalties and receive support from the City.