http://www.signonsandiego.com/news/metro/bell/20070802-9999-1m2bell.html
UNION-TRIBUNE
August 2, 2007
The city of San Diego has launched an all-out effort to police its business tax scofflaws and dun them for unpaid taxes.
Some folks who don't realize that they are operating a business in the city's eyes are getting caught in the middle.
Instead of a business license, San Diego levies a business tax of $34 annually for a small business or $125 for a large business. It's incumbent upon owners to file, and enforcement has been lax over the years.
But city officials recently purchased tax filing data from the state Franchise Tax Board and, as a result, the city is sending out about 40,000 letters of tax violation or liability to businesses that haven't paid up.
It is a much-needed tax that helps support fire, police and general services, explains Robbin Kulek, manager of city treasury operations.
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A few cloudy areas exist, however, as to what does or doesn't qualify as a business in San Diego. One of the most controversial is an investment club – that group of friends or neighbors who gather periodically to buy and sell stocks. About 1,000 such clubs are being issued past-due tax notices because their members file Schedule K profit/loss tax forms with the state.
Bonnie SinClair, one of a group of local ladies who formed Winners on Wall St. a few years ago, recently received a violation notice asking for $369.84 to pay for past-due business taxes, penalties, processing fees and interest.
WOWS is simply an investment club, SinClair insists, not a business that sells products or services.
But in the city's view, it's a business. Kulek explains that San Diego levies a flat tax (not one on gross receipts), and she says a person can be conducting a business even if it generates no income.
There's a glimmer of hope for SinClair and other investment clubs, however. Kulek's office is working with City Attorney Michael Aguirre to review the status of such clubs. For now the city will stop sending liability notices to investment clubs until the issue is clarified.
As for SinClair, she is understandbly confused and upset. Since the club uses her address, “I am afraid that I could end up getting stuck with the fees. I would not be surprised if we just decided to fold the club,” she says.
If the city sticks to its hard-line interpretation, joining an investment club could, indeed, be a more costly investment for all. |