Minutes 05/27/1980 - Laserfiche WebLink

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May 27, 1980 80-176 "Consideration to transfer $105,700 from the Grants Contingency Account to operate the Summer Lunch Program and the Summer Recreation Support Program £or 1980, deferred from the meeting of May 13, 1980." Additional information furnished as requested. Motion of Mr. Beamer and seconded by Mr. Gray, that authorization be granted to transfer $105,700 from the Grants Contingency Account, as requested, and was adopted by unanimous vote. 80-184 - The following report was submitted by the City Manager~ "As you know, representatives of the gasoline retailers located in Portsmouth appeared before City Council May 13, 1980 requestmng rate relief on the gross receipts tax, the taxa- tion basis for a Business License. The following information details the issues involved in the request. Overvisw of the Business License Tax Under Section 58-266.1 of the Code of Virginia, localities may levy and collect a license tax on businesses operating within its boundaries. Acting under that authority, the City of Portsmouth levies business license taxes each calendar year based on operations of the busines for the preceeding calendar year. The Portsmouth License tax is generally based on gross receipts of the firm, however other methods of determining the tax levy for specific types of firms are included in the City Code, i.e., number of barber chairs in the case of barbershops. The 1978 session of the General Assembly amended section 58-266.1 to effect the establish ment of maximum tax rate for each of four classes of businesses. A comparison of these ceil- ings to Portsmouth's current rates is as follows: Ta× Per $100 of Gross Receipts Category State Ceilings Portsmouth Current Rates Contractors 165; min. of $30 $50 first Retail Merchants 20~; min. of $30 $50 first Finance-Real Estate Professional Ser. $8~; min. of $30 $50 first Repair Services 36c; min. of $30 $50 first Personal Services 36&; min. of $30 ~50 first Business Services 36¢; min. of ~30 $50 first $5,000; 20¢/$100 thereafter $5,000; 30~/~100 thereafter $5,000; 70¢/$100 thereafter $5,000~ 30t/$100 thereafter $5,000~ 60¢/$100 thereafter $5,000; 30t/$100 thereafter The law requires that those localities whose rates exceed the ceilings rollback their rates beginning in tax year 1983 if the locality estimates it will receive revenue in excess of the revenue base. (The revenue base for 1983 is 1980 receipts plus one-third of the difference between 1981 and 1980 receipts). Rates will have to be reduced such that estimated revenues 'do not exceed the revenue base. It is estimated that the roll-back in £iscal year 1982-83 will cost the City ~n ex,ss of $300,000 in relation to fiscal year 1981-82 receipts. At present service stations are classified as retail merchants. As such, their business licenses are based on $50 on the first $5,000 of gross receipts and 30 cents for each ~00 above $5,000. State gasoline taxes (currently 9 cents per gallon) are deducted from gross sales. In order to respond to the request to reduce rates, there are two possible methods: 1. Reduce the tax rate on all retail merchants £rom the current 30¢ per $100 of gross receipts· To do so would cos~ in lost revenue to the City an estimated ~35,800 per 1~. 2~ draggle~ ~ s~edial class of retail merchant that would include only service stations, or, further restricted, gasoline retailers only. To do so would cost in lost revenue to the City an estimated $2,860 to $3,320 per it. Issues Involved in Requested Rate Relief In reacting to the requested tax relief we should be mindful of several points: Many business firms over the past several years, as a result of inflationary conditions combined with typical ups and downs of the business cycle, have and are experiencing no change or reductions ~n their profit margins. Undoubtably gasoline retailers are being pinched as bad or worse than most firms. Their situation is compounded by complex pricing arrangments that leave little flexi- bility to the individual retailers. Other firms that find themselves in a similiar quandry include fuel oil distributors. Ail businesses have been impacted by increasing costs resulting from petroleum based products. To attempt to react ~n a positive way on an individual basis, where we attempt to measure the differing circumstances of different firms, and treat them in an equitable way would be an impossible task. As indicated earlier, each le rate reduction for gas retailers would result in an estimated loss of revenue of $3,320 to the City. A ten cent reduction would cost $33,320. In terms of a benefit to the individual retailers in- volved, this rate reduction would save the dealers on average an estimated $725per station.