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SITE NAVIGATION

Business Operations Tax

BOT Modernization Ballot Measure FAQs

Business Operations Tax

BOT Modernization Ballot Measure FAQs

When will the measure be on the ballot?

The ballot measure will appear on the March 5, 2024, Primary ballot.

What is the threshold needed for the measure to be approved by voters?

The threshold for approval is a majority vote of City of Sacramento voters.

Who is subject to the Business Operations Tax?

All businesses that operate in the City of Sacramento or do business with the City of Sacramento must pay a business operations tax. The City of Sacramento does not issue a general business license but requires all businesses that operate in the City of Sacramento to obtain a Business Operations Tax certificate.

What will the Business Operations Tax Modernization Ballot Measure do if approved by voters?

The ballot measure proposes to update minimum payments, maximum payments, flat rates, per unit rates, and gross receipt thresholds that were last changed in 1991 but have not been updated since. The measure also proposes future annual inflation adjustments to those items. The measure would not change the 0.04% gross receipts tax rate. The maximum annual tax liability for any business would increase from $5,000 annually to a new maximum of:

Effective July 1, 2024, the maximum annual tax liability is $25,000.
Effective July 1, 2025, the maximum annual tax liability is $50,000.
Effective July 1, 2026, the maximum annual tax liability is $75,000.
Effective July 1, 2027, the maximum annual tax liability is $100,000.
Effective July 1, 2028, the maximum annual tax liability is $125,000.
Adjusted annually by inflation thereafter.

The impact on an individual business will depend on the business type and business size. A summary can be found in the next section.

The Business Operations Tax Modernization Ballot Measure would NOT impact the Cannabis Business Operations Tax.

What will the impact be on my business?

Below is a comparison between the current Business Operations Tax and the proposed changes in the ballot measure. For more information, please click on your business type.

Type	Current	Adopted Ordinance
Professionals	Flat rate of up to $300 depending on years license, plus per professional/eligible employee rate of $30.	Flat rate of $684 plus per licensed/eligible employee rate of $68; Real Estate Brokers to have a 3-year phase in of flat rate to $228 plus per licensed/eligible employee rate of $68.
Residential Rentals	Flat Rate of $25 plus per unit rate of $1.75. Landlords with 3 or fewer rentals exempt.	Flat rate of $114 plus per unit rate of $2.85. Landlords with 3 or fewer rentals exempt.
Hotel/Motel/Short-Term Rental	Hotel/Motel - Flat rate of $50 per unit rate of $0.75 for each in excess of 4 units. Short-term Rentals - Flat rate of $50	Flat rate of $114 plus per unit rate of $2.85 (the per unit rate applies for each unit over 1).
Gross Receipts Based	Minimum payment: $30 Gross Receipts (GR) threshold: $10,000 Tax Rate: 0.04%	Minimum payment: $50 Gross Receipts (GR) threshold: $100,000 Tax Rate: 0.04%
Maximum Annual Cap	$5,000	Year 1: $25,000 Year 2: $50,000 Year 3: $75,000 Year 4: $100,000 Year 5: $125,000 Future years adjusted by CPI

Cannabis Businesses

Cannabis businesses will NOT be impacted if the ballot measure passes.

Professional business owners

General professional businesses (accountant, architect, attorney, audiologist, bacteriologist, certified public accountant, engineer, dentist, mortician, optometrist, osteopath, physician, podiatrist, psychologist, surgeon, or veterinarian) currently pay a flat rate of $75, $150 or $300 depending on the number of years licensed, in addition to a per professional employee fee of $30. The BOT modernization measure would raise the flat fee to $684 with a per-professional employee fee of $68. Both fees would increase annually in proportion to the consumer price index (CPI).

Professional brokers (non-real estate)

Insurance brokers and stockbrokers currently pay a flat rate of $100 for the principal broker and an additional $30 per employee, agent, or representative. The BOT modernization measure would raise the flat fee to $684 with a per-professional employee fee of $68. Both fees would increase annually in proportion to the consumer price index (CPI).

Professional brokers (real estate)

Real Estate Brokers currently pay a flat rate of $100 for the principal broker and an additional $30 per employee, agent, or representative. The measure would raise the flat fee to $228 based on the phase-in schedule shown below:

Effective July 1, 2024, the tax rate is $150.
Effective July 1, 2025, the tax rate is $200.
Effective July 1, 2026, the tax rate is $228.
Thereafter increased annually in proportion to the CPI.

The measure would increase the per-employee fee to $68, which will increase annually in proportion to the CPI.

Residential real estate (landlords)

Currently, any person engaged in the business of offering rental of residential real property pays an annual flat fee of $25, in addition to $1.75 for each rental unit in excess of 4 units. Any person with fewer than four units is exempt from the BOT. The measure maintains this exemption, but raises the flat rate to $114, plus a flat tax of $2.85 for each rental unit in excess of four units. The flat and per unit rates will increase annually in proportion to the CPI.

Hotels, motels, and short-term rentals

Hotels and motels currently pay an annual BOT of $50 plus $0.75 for each rental unit in excess of four units. The measure would raise the flat rate to $114, plus a flat rate of $2.85 for each rental unit in excess of one unit. Short-term rentals will be treated equivalently to hotels and motels. The flat and per-unit rates will increase annually in proportion to the CPI.

Sales & service

Currently, Sales & Service businesses pay a minimum rate of $30 per year plus a gross receipts tax of 0.04% on gross receipts above $10,000 (minimum threshold). The measure will increase the minimum rate to $50 per year, maintain the 0.04% gross receipts tax rate, and increase the minimum threshold to $100,000. The minimum rate and minimum threshold will increase annually in proportion to the CPI. Tax owed by amount of gross receipts is provided in the chart below:

Annual gross receipts	Current BOT	Year 1	Year 2	Year 3	Year 4	Year 5
$0	$30	$50	$50	$50	$50	$50
$10,000	$30	$50	$50	$50	$50	$50
$100,000	$66	$50	$50	$50	$50	$50
$1,000,000	$426	$410	$410	$410	$410	$410
$5,000,000	$2,026	$2,010	$2,010	$2,010	$2,010	$2,010
$10,000,000	$4,026	$4,010	$4,010	$4,010	$4,010	$4,010
$25,000,000	$5,000	$10,010	$10,010	$10,010	$10,010	$10,010
$50,000,000	$5,000	$20,010	$20,010	$20,010	$20,010	$20,010
$100,000,000	$5,000	$25,000	$40,010	$40,010	$40,010	$40,010
$200,000,000	$5,000	$25,000	$50,000	$75,000	$80,010	$80,010
$300,000,000	$5,000	$25,000	$50,000	$75,000	$100,000	$120,010
$400,000,000	$5,000	$25,000	$50,000	$75,000	$100,000	$125,000
$600,000,000	$5,000	$25,000	$50,000	$75,000	$100,000	$125,000
$800,000,000	$5,000	$25,000	$50,000	$75,000	$100,000	$125,000
$1,000,000,000	$5,000	$25,000	$50,000	$75,000	$100,000	$125,000

What is the projected financial impact?

Based on fiscal year 2022/23 data, the projected financial impact is approximately $3.7M in the first year and approximately $6M per year when the maximum cap is fully phased in.

What can the funding be used for?

Funding generated by this measure is general purpose and can be used for any legitimate governmental activity.

When would the changes take effect if the measure passes?

If approved by voters, the changes to the Business Operations Tax will take effect on July 1, 2024.

I have been granted an exemption from the business operations tax. How does the ballot affect my business?

If your business meets the current criteria for exemption from the BOT (Sacramento City Code 3.08), it will maintain exempt status as the criteria for exemption are unchanged by the ballot measure.

Where can I find more information?

The text of the Ordinance can be found on the City of Sacramento Clerk's website.

The minutes and video from the November 14, 2023, Council meeting where the measure was approved to go on the ballot can be found on the City of Sacramento Clerk's website under Meetings & Agendas.

What if I still have additional questions?

If you have additional questions, please send an email to BOTmodernization@cityofsacramento.org. Please note that City staff can provide factual information regarding the ballot measure but cannot provide any recommendations for whether individuals or groups should support or oppose the ballot measure.

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