News

Backlash over city's business license crack-down

Contract firm in charge of audit lacks business license

Amazon, the online retail giant, sells truckloads of goods every day in Mountain View, yet the company apparently doesn't have a city business license. A fleet of Uber drivers chauffeur customers around Mountain View, yet that company also has no business license on file. Airbnb and Alphabet -- both worth billions of dollars -- evidently also operate without having paid the city's modest annual license fee.

That backdrop might help explain why a recent Mountain View push to get more unlicensed businesses into compliance ended up sparking a bit of a backlash. Some small businesses caught up in the sweep have criticized the city's contract auditors for claiming they need to abide by rules that go unnoticed by big corporations. Perhaps the best example of the city's scatter-shot enforcement: the company hired by Mountain View to perform a citywide business-license audit is itself lacking a local business license.

A Mountain View resident last week flagged some of the inconsistencies in the business-license enforcement after city contractors began pressuring her to get a license for her company that is based in Santa Clara. Jan Johnston-Tyler said that her refusal to pay is a matter of principle, and not about the $31 cost. She says city contractors were trying to claim she had to obtain a Mountain View business license because she occasionally telecommutes from home. She blasted the treatment as being like a "shakedown."

"This really pisses me off," Johnston-Tyler said. "They're telling me that if I send an email or answer my phone at home then I owe them a business tax -- that's insane!"

The dispute erupted last month when Johnston-Tyler was contacted by HdL Companies, a municipal-consulting firm based in Los Angeles County. HdL was hired by Mountain View last year to perform a business-license audit, tracking down unlicensed businesses and pressuring them to come into compliance. Under the deal, the city doesn't pay HdL directly for the work, but the firm is entitled to keep 35 percent of any new business fees they helped capture.

HdL first contacted Johnston-Tyler last month in a letter questionnaire asking about her Santa Clara counseling firm. Johnston-Tyler says she answered the questions honestly, explaining she worked sometimes from home but didn't see clients there or claim her home office as a tax deduction. Her firm was already paying about $300 each year in Santa Clara business taxes, she explained.

A few days later, an HdL representative called Johnston-Tyler up and said that since her home was being used for business, she was obligated to get a business license.

Johnston-Tyler complained to city officials, and the city attorney later responded by pointing her to a section of the city's municipal code, which states that anyone who conducts business within Mountain View must pay the city's fees. This code section clearly states this requirement should be applied to all businesses, regardless of whether they're located outside the city limits.

Needless to say, that information did little to assuage Johnston-Tyler's frustration. Countless employees telecommute throughout Silicon Valley, she points out, so why was she being singled out?

"How are they applying this equally to all of Mountain View?" she said. "If we take this to mean any company that telecommutes owes business tax ... then this pretty much applies to everyone."

In their application to Mountain View, HdL managers said their firm targets non-compliant businesses by comparing data sets for state business listings, sales tax allocations, property tax information and phone directories. Calls to HdL Companies seeking comment were not returned by the Voice's Wednesday press deadline.

The audit of the city's business license listings was launched last year although the idea has been under consideration for years among City Hall officials, said Finance Director Patty Kong. While Mountain View has thousands of listed businesses, not much revenue is generated from the license fees, which range from $31 up to $790, depending on the type and location of a business. In the 2014-15 fiscal year, license fees generated only about $258,000.

Given the small amount of money at stake, the city didn't make it much of a priority to go after unlicensed businesses, Kong said. But she emphasized that the city code states that anyone conducting "business activity" in Mountain View must have a license, Kong said.

"The obvious ones are when your business is in Mountain View, but there's other situations where you may need one with a separate business address," she said. "For example: a contractor who has a business in San Jose, but is doing business in Mountain View, or a consultant providing services in Mountain View -- that's a business activity."

What about an auditor hired to work in Mountain View? It would stand to reason that HdL would fall under these same requirements since the firm is clearly conducting business in Mountain View. Asked about this, city finance staff said they could find no record of HdL obtaining a business license.

Many tech firms with a sizable business presence in Mountain View are also conspicuously absent in the city's business-licenses database, including Amazon, Uber and Airbnb. It should be noted that Google has about 60 licenses on record for its various branch companies based in Mountain View, but its overarching firm, Alphabet, is not listed in the city records.

Are these tech giants also obliged to get a business license? That's something the city hasn't delved into yet, Kong said.

"You're raise a good question (since) they're doing commercial activity," she said. "That's why we hired HdL, we wanted them to discover who needs a business license."

So far, HdL has produced only "a handful" of new business licenses for Mountain View, Kong said. She could not specify exactly how many. That information would be in a upcoming status update, she said. As part of its contract with Mountain View, HdL agreed to provide a monthly report on its activity. But the company has not followed through on this, and these reports haven't been submitted, Kong said in an email.

In regard to Johnston-Tyler's case, city officials informed the Voice last week they were investigating her situation. On Friday, city officials notified her that her business shouldn't require a Mountain View license.

"Just the whole idea of making me get a business license was crazy," she said via email on Tuesday. "It's bureaucratic overreach."

Email Mark Noack at mnoack@mv-voice.com

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Comments

29 people like this
Posted by vonlost
a resident of Cuesta Park
on Jun 6, 2016 at 2:23 pm

Instead of enforcing a rule that obviously doesn't make sense, change the rule. Bureaucrats need to speak up when they see nonsense.


19 people like this
Posted by Tina
a resident of Castro City
on Jun 6, 2016 at 2:33 pm

Tina is a registered user.

wow.

a) that the auditors get a commission. Makes sense, I guess, but seems like it's also making them more like those annoying telemarketers, but with gov't power.

b) is our city so desperate for $$ that they need to go this far? Granted, it is something that should be enforced if that is the rule, otherwise, Why have business licenses?

c) stupidity of the auditors. Seriously? You're auditing business licences, wouldn't the first thing you check be your own company?

so... Thanks for the story, but wow.


10 people like this
Posted by juan olive
a resident of Old Mountain View
on Jun 6, 2016 at 2:33 pm

Find out how long this has been going on. I am not a business owner but this must really get people upset. Profit, Profit is what it's about when you get down to it.
Unbelievable.


24 people like this
Posted by PeaceLove
a resident of Shoreline West
on Jun 6, 2016 at 2:47 pm

License: n. When the government takes away an existing right then sells it back to you.*



*Unless you're a billion-dollar corporation


14 people like this
Posted by vkmo
a resident of Cuesta Park
on Jun 6, 2016 at 3:08 pm

This was an ugly thing to do by the city. City should refund everybody who was forced to pay.


21 people like this
Posted by property owner in Socal
a resident of Waverly Park
on Jun 6, 2016 at 3:14 pm

There are over 100 properties listed on airbnb in the City of MV. I am sure they are all paying for a business license. NOT.
Their business is clearly in MV, mine is not. Regretting now, to have paid my fee and fine.


17 people like this
Posted by FYi
a resident of Old Mountain View
on Jun 6, 2016 at 3:55 pm

I've had a business license for years - it costs $30 a year. What's the problem here? What's wrong with complying with the law? Ignorance, as we know, is not defense.


8 people like this
Posted by Resident
a resident of Old Mountain View
on Jun 6, 2016 at 5:25 pm

I find it ridiculous that any city could require a license to do business. I know it's common practice, but still, shame on you Mountain View (and CA for the things the state licenses). Running businesses is mutually beneficial to businesses and residents.

People should be free to sell each other goods and services without permission.


26 people like this
Posted by Working Stiff
a resident of Castro City
on Jun 6, 2016 at 6:25 pm

A timely and long-overdue issue for reporting.

I called the city last week about a homeowner who converted their entire home to Airbnb resulting in rental cars all over the place, smoking within 25 feet of my window, etc. I called the city Code Enforcement Department and asked if the homeowner had a business license. The lady who answered said it was not an issue because the city is not enforcing Airbnb at this time (i.e., the typical "go away" response you get from the city these days) I asked why not? It's a business and the homeowner doesn't live there. One only has to look at all the great reviews the place gets on Airbnb. People stream in and out of the place every week, just like at a hotel. But it's not a hotel or a business in the eyes of the city apparently. I then asked if the fire department had inspected this Airbnb hotel? Their is an ordinance for that as well. That was followed by a long pause. Hello, are you there? I was told she would pass it on to the City Attorney and that she would get back to me. Well, I'm still waiting.

BTW concerning Airbnb, there are also city ordinances regarding hotels, which are very broadly defined by the city and which include Airbnb-type arrangements. One of them mandates a 12% tax. The city is definitely missing out on that revenue as well. And there is also a rather obscure city ordinance that states that there must be one parking space for every room in a hotel. My neighbor's Airbnb fails on that score as well. Good luck finding parking in my neighborhood. Meanwhile, the rest of us working stiffs trying to scrape out a living and follow the law have to pay for higher water. garbage and sewage costs, to rent a BBQ at a mangy park, or to swim in the city lap pool.

What this is really about is people trying to get around the law and city employees too comfortable in their secure jobs that they are not performing. Ignorance of the law is no excuse. All businesses/individuals should be expected to pay for the license (I have one) and pay hotel taxes if they are running an Airbnb type lodging.


30 people like this
Posted by Reader
a resident of another community
on Jun 6, 2016 at 9:47 pm

This is utterly asinine.

So if I take a phone call or read an e-mail from one of my colleagues at home, I basically need to pay for a business license. And if I take calls in Sunnyvale, Palo Alto, Redwood City, or Santa Monica, I also need to pay for those cities' business licenses?

THE CITY SHOULD FIRE HDL.

Taxpayer dollars and city employees time are being *WASTED* on these utterly MORONIC harassments.


8 people like this
Posted by residing in mv
a resident of Another Mountain View Neighborhood
on Jun 6, 2016 at 10:39 pm

Working Stiff,
I think it's time to contact our elected officials on the city council. They need to come up with an ordinance to control these rentals, since no hotel should be run in a residential neighborhood. Don't we have zoning laws in Mtn View anymore. And how many housing units are taken off the rental market this way.


9 people like this
Posted by Huh?
a resident of Another Mountain View Neighborhood
on Jun 6, 2016 at 11:21 pm

Most residents are living in rentals in MV. Greedy landlords are taking advantage of Prop 13 to pay next to no property taxes while charging astronomically high rents to their poor tenants.

Most of these money-grubbing landlords HAVE NO BUSINESS LICENSES!!!!! Go after them.

AirBNB is not the problem. If you have a problem with a neighbor (renting or not) due to noise or crime, then call the police. If they are not breaking noise or other laws, but are an AirBNB, then what are you complaining about? Sounds like you are the one with the problem.


10 people like this
Posted by Evan
a resident of Jackson Park
on Jun 7, 2016 at 6:49 am

@Huh,

This article is about the city going after businesses that are in accordance with city ordinances.

Per the city's ordinances as stated homeowners who make money with Airbnb must pay a business license fee and the city's hotel or transient lodging fee. They are not.


7 people like this
Posted by property owner in Socal
a resident of Waverly Park
on Jun 7, 2016 at 8:13 am

@FYI the complaints here are not regarding following the law, I am all for it. But I am not doing business in MV, doing business in other CA cities and pay my fees there. YET the City of MV went after me and not the people who are actually doing business here. By the way Sunnyvale is getting their fair share from all airbnb rentals, an easy thing to do, the listings are public. I pay fees for my rentals in these other CA cities that MV does not have. The City of MV is definitely missing out and not very smart about their income sources for fees, occupancy taxes etc.


9 people like this
Posted by Steve
a resident of Shoreline West
on Jun 8, 2016 at 2:59 pm

@Huh?

"If they are not breaking noise or other laws, but are an AirBNB, then what are you complaining about?"

Zoning. Perhaps I should open a heli-port next to you.


3 people like this
Posted by moreoversight
a resident of Old Mountain View
on Jun 10, 2016 at 2:55 pm

The city hired a telemarketing/bulk mailing firm whose only goal is to make money for themselves, not to educate the recipients correctly when a license is required. The city provided poor oversight and training. The mailing was poorly targeted (casting a wide net) by design. Many hundreds of people probably received erroneous letters looking for fees. Self managed HOA's are exempt, but did the letter state specifically who is required to pay for a license and who is exempt? Hopefully, no seniors, nor anyone else were duped into paying a fee that was not required.


Posted by Name hidden
a resident of North Whisman

on Sep 25, 2017 at 11:04 am

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?


Sorry, but further commenting on this topic has been closed.

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