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CITY OF SAN BERNARDIt.O - REQUE_ r FOR COUNCIL AC'. .ON
Dept:
City Clerk
Subject: Ordinance Amending Section
5.04.525, Subsection E of
Municipal Code - Inclusion of
Temporary Employment Services
Under Wholesalers for Business
From:
Shauna Clark
Date:
August 4, 1988
T,; ("'pn~; ng
Synopsis of Previous Council action:
None
Recommended motion:
That further reading of the ordinance be waived and that said
ordinance be laid over for final passage.
cc: Mayor wilcox
City Attorney Penman
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Signature
Contact person:
Shauna Clark
Phone:
5002
Supporting data attached: Ordinance, Legal Opinion Ward: All
88-33, Letter dated February 29, 1988
FUNDING REQUIREMENTS: Amount:
Source: (ACCT. NO.)
(ACCT. DESCRIPTION)
Finance:
Council Notes:
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ORDINANCE NO.
ORDINANCE OF THE CITY OF SAN BERNARDINO AMENDING SECTION
5.04.525 SUBSECTION E OF THE SAN BERNARDINO MUNICIPAL CODE TO
INCLUDE TEMPORARY EMPLOYMENT SERVICES UNDER WHOLESALERS FOR
BUSINESS LICENSE PURPOSES.
THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO
DO ORDAIN AS FOLLOWS:
SECTION 1.
Section 5.04.525 Subsection E of the San
Bernardino Municipal Code is amended to read as follows:
liE..
Manufacturers/Wholesalers.
Every person, firm or
corporation manufacturing and selling any goods, wares,
merchandise or services at wholesale, and not otherwise
specifically taxed by other provisions of this article, shall pay
an annual license fee of forty dollars or a fee of one-fourth of
one-tenth of one percent (.00025) of annual gross receipts from
sales originating within the boundaries of the City, provided
such goods, wares, merchandise or services are not shipped
outside the State of California, whichever is greater, payable
quarterly in four equal payments.
Temporary employment services
shall be included within this subsection."
I HEREBY CERTIFY that the foregoing ordinance was duly
adopted by the Mayor and Common Council of the City of San
Bernardino at a
meeting thereof, held on
the
day of
1988,
by the following'
vote, to wit:
28 7-11-88
DAB:cm
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AYES:
NAYS:
ABSENT:
The foregoing ordinance is hereby approved this
day
of
1988.
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11 Approved as to form
12 and legal content:
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28 7-11-88 2
DAB:cm
EVLYN WILCOX, Mayor
City of San Bernardino
c
BERNARDINO
300 NORTH "0" STREET. SAN BERNARDINO. CALIFORNIA 92418
JAMES F. PENMAN
CITY ATTORNEY
17141384.5355
July 27, 1988
Opinion No. 88-33
10.38
SHAUNA CLARK
City Clerk
Re: Temporary Employment Services
ISSUE
You have asked two questions: The first relates to whether the
gross receipts of a temporary employment service may be used to
determine the amount of the business license fee when some of the
employment services are performed outside the City limits. You
also question whether you may administratively move the
designation of such temporary services from "employment agencies"
to the designation as wholesalers.
ANALYSIS
Gross Receipts:
The first question
receipts" as used in
business licenses,
services.
relates to the meaning of the term "gross
the Municipal Code provisions relating to
and as applied to temporary employment
Such temporary employment services have been administratively
included under the category of "Employment Agency" in San
Bernardino Municipal Code Section 5.04.525. The license fee is
based on "annual gross receipts or commissions".
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Shauna Clark
July 27, 1988
Page Two
San Bernardino Municipal Code Section 5.04.055 provides how fees
based on gross receipts are to be applied. "Gross receipts" are
defined in Municipal Code Section 5.05.060 as follows:
"'Gross receipts' as used in this article, except as
otherwise specifically provided, means the total amount
of revenue received as the sale prices of all sales and
the total amount charged or received for the
performance of any action, service or employment of
whatever nature it may be, for which a charge is made
or credit allowed, when such service, or employment is
done as a part of or in connection with the sale of
materials, goods, wares and merchandise, or the
performance of services; 'gross receipts' includes all
receipts, cash, credits and property of any kind or
nature, and any amount for which a credit is allowed by
the seller to the purchaser without any deduction
therefrom on account of the cost of the property sold,
the cost of the materials used, labor or service costs,
interest paid or payable, or losses or other expenses
whatsoever; 'gross receipts' further includes
commissions received for the sale of real property and
the annual gross receipts, fees or commission of every
person, firm or corporation conducting, managing,
carrying on or engaged in any business or profession of
any nature whatsoever, including the providing of
services relating thereto; but 'gross receipts' does
not include cash discounts allowed and taken on sales
and any sales tax paid to the state, a municipality or
public entity."
The sections is silent on whether it relates to services provided
outside the city or billed from outside the city. The general
rule is stated as follows:
" [M]unicipal licensing under the police
power is confined to businesses, activities and
privileges conducted or exercised within the municipal
limits. "(McQuillin, Municipal Corporations,
Section 16.09)
The California Supreme Court case of City of Los Angeles v.
Belridge Oil Co. (1954) 42 Cal.2d 823, discussed a business
license tax on the sale of an oil company. The challenge to the
tax was based on the fact that the oil was produced in Kern
County and delivered to the purchasers without ever entering the
City of Los Angeles. The court concluded:
-
Shauna Clark
July 27, 1988
Page Three
"In the case at bar defendant company, being a corporation,
is a person as defined in Section 21.08(p) of the Los
Angeles tax ordinance. The petroleum products with which it
deals are considered in the nature of merchandise. . and
the gross receipts of defendant company are derived from the
sale of such merchandise. Most negotiations for these sales
were conducted through the defendant's Los Angeles office
and all contracts were signed by defendant in Los Angeles.
Also payment for all sales is received from purchasers at
the Los Angeles office . .
"The mere fact that the products sold never entered the
City of Los Angeles does not prevent the selling
activi ties from taking place in Los Angeles . the
business license tax in question here, is based on the
fact that the selling activity is carried on within the
city and it is immaterial where the products are
produced or delivered. In the case at bar it is
true that some of the gross receipts are attributable
to extraterritorial elements such as the production and
delivery of the goods. However, there is no
constitutional objection to resorting to
extraterritorial elements in determining the rate of
tax." (Los Angeles v. Belridge Oil Co., (1954) 42
Cal.2d 823, 830-831)
The court warned, however, that although extraterritorial
elements cold be resorted to in determining the rate of the tax,
they would not be relied upon to determine the fact of the tax
(at 832).
In the present situation, if the offices of the temporary
agencies in question are located within the City and
solicitations are made and individuals are sent out from that
location, the fact that the temporary services are actually
performed outside the City is immaterial. On the other and, if
the offices are located elsewhere, and the services occur within
the city, this would not be sufficient to impose a tax on the
gross receipts.
The second question relates to whether, since the temporary
services were placed within the employment agency category, your
office can make an administrative decision to move them to
another category. It is our opinion that due to the length of
time involved that you cannot. We have prepared an ordinance
(see attached) which would accomplish this objective.
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Shauna Clark
July 27, 1988
Page Four
CONCLUSION
A business license fee based on gross receipts for a temporary
employment service may be based on services solicited and sent
from a San Bernardino office, even though performed elsewhere.
Your office may not administratively move the designation of
temporary services from employment agencies to wholesalers.
Respectively submitted,
BARLOW
City Attorney
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Enclosure
cc: Mayor
City Administrator
Approved:
I '~~1 L,-,-
c.i'ty Attorney
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CITY OF SAN BERNARDINO -
MEMORANDUM
To
James F. Penman, City Attorney
From
SHAUNA CLARK
City Clerk
February 29, 1988
Subject
Temporary Services/Business License
Date
Approved
Date
In the process of auditing businesses,
ing the determination of gross receipts
agencies have arisen.
two 1ssues concern-
for temporary help
Please see the attached letter dated February 17, 1988,
from Remedy and the letter dated February 16, 1988, from
Mayday. Both help agenc1es question whether gross receipts
for services provided outside the City of San Bernardino must
be included for computation of business license. Remedy goes
a little farther and questions whether serV1ces inside San
Bernardino, but billed from their main office, must be
included.
I feel that gross receipts should include fees for ser-
vices provided within the City of San Bernardino and a per-
centage of what comes through the San Bernardino office but is
placed outside the City limits.
The second issue concerns the classification of the
temporary services businesses. Prior to 1983, temporary help
businesses ',",ere charged $40 per year. The business license
ordinance was amended to convert most flat rate licenses to
pay on gross receipts. There were several gross receipts
categories that already existed in the code so converted
licenses were placed 1n existing categories <-lith like busi-
nesses. Employment Agencies were in the professional rate
category so temporary help services were added.
There is a di fference between an employment agency and a
temporary help agency in terms of gross receipts. The employ-
ment agency gets a percentage of flat fee, usually on a one
time basis, for placing an employee. A temporary help agency
acts like a labor retailer. For example, a temporary place-
ment is made and a fee of $15.00 per hour is charged fOr the
service, the employee receives $10.00 per hour, and the
temporary agency nets $5.00 per hOUr. According to the
professional rate the business license computation would be
based on the $15.00 per hour; the $10.00 per hour paid the
employee is a cost of doing business to the temporary service
prov ider. As you can see, the vol ume of gross rece i pts is
much higher to a temporary agency than it is far an employment
agency.
Jim Penman
Page 2
2/29/88
I would like to have temporary agencies classed as whole-
salers which is a lower rate category. The business license
for one of our temporary agencies went from $40 in 1983 to
$4600 per year in 1988. The wholesale rate category would be
lower than the professional rate category. I feel the whole-
sale rate would be more equitable but need a legal inter-
preta t i on as to whether or not I can change ca tegor i es for
this type of business. If you determine that a code change is
necessary, I feel comfortable in taking it before the Council.
As the audits for these temporary agencies are being held
in suspense pending legal clarification, a prompt reply would
be appreciated.
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cc: Mayor wilcox
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