Business Tax Exemptions

Please note exemption from the City of San Diego business tax assessment does not assure exemption from the Business Improvement District (BID) fee.

• Charitable Institutions & Non-profit Organizations
• Home Daycare Provider
• Board and Care/Nursing Home
• Blind Persons
• For-Hire Motor Carrier of Property
• Insurance Broker-Agents
• Banks & Financial Institutions
• Bail Bond Agents
• Real Estate Brokers and Realtors
• Veterans
• Real Estate Auctioneer
• Religious Leaders
• Limited Duration Activities
• Clarification Regarding Two or More Businesses or Activities at the Same Location

Charitable Institutions & Non-profit Organizations

Charitable institutions & non-profit organizations are exempt from paying the Business tax assessment. Proof of exemption in the form of an Internal Revenue Service or State Franchise Tax Board non-profit determination letter, or Secretary of State Certification is required at the time of filing.

Reference: Revenue & Taxation Code Section §23701 (a-z)

Home Daycare Provider

A home that provides family daycare for eight or fewer children, including children under the age of 10 years shall be exempt from the business tax assessment. Daycare provider must provide copy of state daycare license.

Reference: Health and Safety Code Sections §1597.45 & §1596.78

Board and Care/Nursing Home

A residential and community care facility, which serves six or fewer persons shall not be subject to the business tax assessment. Copy of the state license to operate a board and care/nursing home must be provided.

Reference: Health and Safety Code Sections §1566.2 & §1567.8

Blind Persons

Per San Diego Municipal Code the Office of the City Treasurer is hereby authorized to issue a certificate with payment of a business tax to a business, the sole owner of which is a blind person certified as such by the Bureau of Vocational Rehabilitation of the Department of Education of the State of California. The blind business owner must submit this certificate before the exemption will be granted.

Reference: San Diego Municipal Code §31.0204

For-Hire Motor Carrier of Property

If a for-hire motor carrier pays the Department of Motor Vehicles (DMV) tax set forth in the State Revenue and Taxation Code §7231 - §7236 and the tax paid is in lieu of all city and county business taxes (Revenue and Taxation Code §7233 and 7234), the business would be exempt from paying the business tax assessment. Proof would be documentation showing the state tax was paid. The For-Hire Motor Carrier company office will be required to apply for a Business Tax Certificate.

Reference: Revenue & Taxation Code §7234

Insurance Broker-Agents

Any broker-agent acting as an agent for an insurance provider is exempt from paying the business tax assessment. These are "agents" appointed by insurance companies to represent the insurance company and to sell their products. To be an "agent" the insurer is required by law to file an appointment document known as a "Notice of Agency Appointment" with the California Insurance Commissioner's Office.

The agent exemption is applicable to the agency activity. If the appointed agent is engaged in other business activities, such as court service, estate planning, etc, the agent is not exempt from paying the business tax assessment on those activities. Since the City of San Diego does not collect business tax revenue based on gross receipts, if any part of an insurance business derives revenues in a capacity other than an agency relationship with an insurer, the business is subject to the business tax.

The broker-agent must provide the following supporting documentation:

• Copy of the "Notice if Agency Appointment" and payment filed with the California Insurance Commissioner's Office.

Reference: California Constitution Article 13, sec 28(f)

Banks & Financial Institutions

Banks and financial institutions are exempt from paying the business tax assessment if they pay the State of California an "in lieu" tax. An in-lieu tax is a tax amount greater than the standard corporate tax rate, paid to the State of California in-lieu of local city or county tax. As of January 1, 2007 the Corporate Tax Rate is 8.84%. Banks and Financial Institutions pay an additional in-lieu tax of 2% for a total tax rate of 10.84%.

California State Revenue and Taxation Code §23182 allows financial corporations to pay a tax to the state in-lieu of all other state, country, and municipal taxes and licenses, except for the following: tax on their property, local utility use tax, sales and use tax, state energy resources surcharge, and state emergency telephone user surcharge, and motor vehicle fees. As proof, Banks or Financial Corporations may provide a copy of Form 100 (California Corporation Franchise or Income Tax Return).

Reference: California Constitution Article 13, sec 27 and Revenue & Taxation Code §23182

Bail Bond Agents

Bail bondsmen are considered an agent of an insurance company and are therefore exempt from paying the business tax assessment if this is their only business activity.

Reference: California Constitution Article 13, sec 28(f) and Grove v. Los Angeles (40 cal 2d 751.256)

Real Estate Brokers and Realtors

All real estate brokers with offices located within the City of San Diego are required to obtain a Business Tax Certificate. They are also required to report on their certificate any real estate agent working for them. Real estate agents are not subject to the business tax if they are working solely for a broker. In the event a broker/agent is working both for a broker and conducting his/her own business he/she are subject to the business tax assessment for such ownership. If a business has more than one office location, a separate Business Tax Certificate is required for each location.

The State of California licenses brokers and realtors to conduct business within the State. There is no regulation that prohibits a broker or agent from selling property in the City of San Diego without a Business Tax Certificate provided that the actual transactions occur in their office and their office is located outside the City of San Diego. In these situations, brokers and agents should not represent to potential clients via any form of advertising that their business is located within the City of San Diego.

Reference: Business & Professions Code §10322 & §10137

Veterans

Veterans who meet the criteria listed below are exempt from paying the business tax assessment.

• The applicant is physically disabled veteran who was honorably discharged or honorably relieved;
• The applicant is a voter of the State of California; and
• The applicant is requesting a license to distribute circulars, or to hawk, peddle or vend any good, wares or merchandise owned by him except for liquor.

Reference: Business & Professions Code §16001 & §16001.5

Real Estate Auctioneer

Real Estate Auctioneers are exempt from paying the business tax for the privilege of auctioning real estate, except where he has a permanent place of business.

Reference: Business & Professions Code §16002.1

Religious Leaders

Ministers, clergyman, Christian Science practitioners, rabbis, or priest of any religious organization that has been granted tax-exemption specified in section 501(c) (3) of the Internal Revenue Code shall be exempt from paying the business tax assessment.

Reference: Revenue & Taxation Code §7284.1

Limited Duration Activities

No Business Tax shall be levied nor certificate of payment issued to any person who is engaged in activity otherwise requiring payment of a business tax if that person engages in the activity for six (6) or less days in the course of one (1) calendar year. Such limited duration activity will not be interpreted as engaging in a regular business in the City of San Diego.

Reference: City of San Diego Municipal Code Section §31.0202

Clarification Regarding Two or More Businesses or Activities at the Same Location

San Diego Municipal Code §310302 states the following:

Whenever any person is engaged in two or more activities at the same location, under a single business name, such as manufacturing and retailing, then such person shall not be required to pay a separate business tax for each type of activity, but the total number of employees of all types of activities combined shall be used as the basis for computing the amount of tax to be paid for the conduct of all such types of activities under a single certificate.