Business License Tax Update and Fiscal Sustainability

The City of Foster City is dedicated to supporting residents and maintaining the local quality of life. As part of that commitment, the City maintains key services including public safety, parks, and infrastructure such as streets, roads, storm drains and more that our residents, businesses, and visitors depend upon. 

The City  has been confronted with escalating costs and a structural budget deficit and financial forecasts suggest that coming years could be similarly challenging, potentially requiring the City to draw from reserves to balance the budget. To address those challenges and sustain local services, the City explored potential avenues for additional revenue. 

Business License Tax Update

One such opportunity for additional revenues included revisions to the Business License Tax (BLT), which is an annual fee for doing business within the incorporated area of the City of Foster City. The BLT was first introduced when Foster City was incorporated and, prior to 2024, had only been updated once in the previous 53 years.  

Measure V  

In the November 5, 2024, Election, Foster City voters approved Measure V, a proposal to update the City’s BLT. The amended tax model includes a tiered gross receipts rate structure of $0.75 to $3.00 rate with a maximum tax of $250,000.  For more information about Measure V, please click here. 

Frequently Asked Questions

What is a business license?

A business license is an annual regulatory permit for the privilege of conducting business within the City. This license is issued after a business has complied with applicable local, state and federal requirements and has paid applicable fees/taxes. The business license is required to be renewed annually. 

When is a business license required?

The Foster City Municipal Code requires that any person or entity who conducts business in or whose business is based in Foster City, is required to obtain a Foster City Business License. “Business” includes professions, trades, occupations etc. Conducting business in the City without a valid business license can result in penalties and other enforcement actions.  

Prior to Measure V, what were the business license tax rates in Foster City? 

The City of Foster City’s Business License Tax Ordinance was first adopted in 1972, shortly after the City’s incorporation. Since that time, the Ordinance had  been updated only once in 2013. The minimum Business License Tax was $100 ($200 for general contractors). The City’s Business License Tax included a gross receipts component consisting of a fixed business license (gross receipts) tax rate of 75 cents per $1,000, on a business' first $39,196,000 in reported gross receipts (for calendar year 2024).  The taxable gross receipts were adjusted annually for inflation based on the local Consumer Price Index (CPI).   

Nonprofit Organizations as defined under Section 501(c)(3) of the United States Internal Revenue Code and Farmers Markets approved by the City, whether held on public or private property are exempt from Business License Tax.  

What do revenues generated from Business License Tax go towards?

Approximately 85% of the City’s General Fund budgeted revenues come from taxes. Revenues from Business License Tax currently generate approximately between $1.6 million to $1.9 million annually, constituting about 3% of the City’s $58 million General Fund revenue. These unrestricted funds support essential City services such as maintaining: 911 emergency medical, police, and fire response times and services; clean, safe, and inviting parks and recreation facilities; infrastructure to prevent flooding and other hazards; local streets, pathways, bike lanes, and public sidewalks. All these core vital services provided by the City contribute to making Foster City a great place to live, work and play. 

​​​​​​What are gross receipts?

“Gross  receipts” as defined in Foster City Municipal Code generally refers to the total revenue and other receipts of a business from the sale of goods and services.  A number of items are specifically excluded from the definition of “Gross Receipts” in the Municipal Code.  For a complete definition and list of exemptions, refer to Section 5.08.050 of the Foster City Municipal Code here.

What if I also do business outside of Foster City, can I apportion my receipts?

Business license taxes are based on income producing activity.  An apportioning taxpayer may reduce its total receipts from its operation by a percentage that reflects the proportion of the cost of in-city to out-of-city activity.  A business may deduct the percentage of gross receipts deemed to be directly attributable to income producing activities conducted outside of the City of Foster City.  Businesses seeking apportionment may wish to consult with a tax advisor. 

What if my business has multiple locations, some of which are outside of Foster City? 

If you are conducting business in multiple jurisdictions, you will need to contact each jurisdiction to determine if a business license is required.  It is important to know that most California cities and counties have a Business License Tax ordinance.  However, each city and county has its own tax rate, structure, and requirements. Check with the appropriate city or county for their Business License Tax information. 

How would potential changes to the Business License Tax impact small businesses? 

Under the amended BLT model, it is estimated that a majority of Foster City businesses will pay only the minimum tax, which amounts to $100, or $200 for general contractors. The minimum tax would increase annually based on the SF Bay Area CPI-U. 

 

Town Hall Meetings

Prior to Measure V going on the ballot, the City hosted three previous Town Halls on the matter. Watch video of the May 29 in-person session here.  Watch video of the May 30 virtual session here. Watch video of the July 9 hybrid session here. 

Interested in knowing more about the City's budget?

Read the annual budget and associated financial reports here. 

Click here to see City Council meeting materials related to Measure V

 

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