Business Tax Implementation 2023
With the passage of Measure K in November 2022, the City will soon implement a business tax. The tax is structured so that each quarter tax is due the first day of the following quarter. While the tax began January 1, 2023, the first payment will not be due until January 2024 and will be paid on a quarterly basis thereafter. The Business Tax, Business Registry Certificate, and the Downtown Palo Alto Business Improvement Fees will be administered and collected in one portal.
What's New
Business Tax Filing Update
November 2023: The first Business Tax payment is due on January 1, 2024, for the calendar year of 2023. Late penalties and fees will be assessed starting February 1, 2024. After the initial first payment, filings shall be submitted on a quarterly basis. Notices too all business in the Business Registry were mailed out in mid-November that include your Business Tax account filing credentials (account numbers and PIN), which are required to file your Business Tax. If you have not already updated your contact information, please contact HdL at (650) 838-2882. If you have not registered for the Business Registry Certificate program, you may create a login to apply at https://paloalto.hdlgov.com/
In addition, City staff and HdL hosted their first Information Session on November 15th. The session included a brief overview of the tax filing and payment portal. There will be one more session on Tuesday, December 5, 9:00-10:00AM – there is still time to register! More information on these two items below.
- Information Session on December 5: Register Here!
- The recording of the Information Session held on November 15th is available here
Administrative Regulations Issued
October 2023: Considering feedback from the September 2023 Focus Group sessions and virtual consultations to date, City staff has issued Administrative Regulations and are linked under the Resources section of this webpage. Compared to the draft released in August 2023, the final version includes instruction on how to file for parent companies and subsidiary companies.
Registration for Information Sessions
October 2023: In addition to scheduling a Virtual Consultation, City staff and HdL are hosting two virtual Information Sessions. These sessions will include a brief overview of the tax filing and payment portal and be an open forum for participants to ask questions. Please see dates, times, and the registration link below:
Filing and Payment Portal is Live
October 2023: The City’s online Business Tax filing and payment and Business Registry Certificate application portal is live. City staff and HdL are working together in October to ensure that the database of businesses is up-to-date. If your contact information has changed since your last business registration, please contact HdL at PaloAlto@hdlgov.com or (650) 838-2882. For businesses who have not participated in the Business Registry Certificate program, you may create a log in to apply for the certificate at PaloAlto.hdlgov.com. In November, HdL will be sending Business Tax filing account credentials to your contact information in the Business Registry. Please ensure that your business is registered and contact information is current by October 30th.
Upcoming Engagement and Education Opportunities this Fall
September 2023: The City has partnered with HdL Companies to administer and collect the business tax. Beginning October 2023 through January 2024, the City and HdL will be hosting Information Sessions to assist taxpayers with navigating the City’s online payment filing and payment portal and be available for virtual consultations to answer questions about the tax, assist with filing and payment, and discuss and review eligibility for exemptions and/or tax offsets. Please subscribe below receive updates on these resources and other news.
Virtual Focus Groups on Business Tax Implementation
August 2023: The City is on track to implement Palo Alto’s Business Tax in early 2024. Join an upcoming focus group discussion to learn about and provide feedback on business tax resources, administrative regulations, and the filing process. Topics important to you and your business include: basic business tax exemptions, the tax filing form and tax filing timeline. These learning and input sessions are tailored to assist you with filing and an opportunity to ask questions you may have. The sessions will be hosted the week of September 11. Links to register are below.
Implementation Schedule
| January 2023 |
Tax assessment period begins |
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June 2023
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Selection of vendor for the administration of the Business Tax (BT) and Business Registry Certificate (BRC) Program and recommendation to Council for approval |
| August 2023 |
Draft Administrative Guidelines and Quarterly Filing Form available on this website |
| September 2023 |
Focus Groups with Business Community (Focus Group Presentation(PDF, 3MB)):
- Monday, 9/11/2023 9:00-10:00 AM
Session 1: Exemptions, offsets, reporting and payments
- Wednesday, 9/13/2023 10:00-11:00 AM
Session 2: Reporting, payment, penalties and records retention
- Thursday, 9/14/2023 10:00-11:00 AM
Session 3: Exemptions, offsets, reporting and payments
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| October 2023 |
Business Tax and Business Registry online portal launched.
Administrative Guidelines issued and available on this webpage
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| November/December 2023 |
Information Sessions with Business Community
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| January 2024 |
Tax collection begins |
Information about the administration of the tax, instructions, and necessary paperwork for filing and payment will be posted on this webpage as they are available.
Tax Characteristics
The Business Tax is imposed on each square foot occupied by the business, with exemptions for certain business types and tax credits for remitted hotel tax, certain sales tax paid by a business, and vacant space. Please refer to the below chart for details of rate, timing, exemptions, and credits:
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Rate & Timing
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- Monthly rate of $0.075/square foot for all non-exempt businesses
- A $500,000 annual tax cap, adjusted by CPI.
- Flat 2.5% increase annually applied to both the month rate and tax cap, beginning fiscal year 2026-2027
- Continue existing BRC Program for all eligible businesses.
- Tax to be imposed January 2023. Quarterly collections beginning January 2024
- 50% of monthly rates for first 24 months; full tax rate January 2025
- 35-year sunset, ending 2058
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Exemptions & Credits
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- Small businesses (first 10,000 square feet of all businesses)
- Grocery or Supermarket stores
- Seasonal businesses operating less than 90 days.
- Residential space
- Tax Credits:
- Hotel tax
- Certain sales tax paid by a business (2:1, up to 75%)
- Vacant space
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Please note the requirement to pay the business tax is in addition to the business registration certificate (BRC). Please refer to the City’s Business Registry Certificate Program (BRC) page for more information: https://www.cityofpaloalto.org/Business/New-Business/Business-Registration
The City’s Administrative Services Department is preparing additional information about the administration of the tax, including necessary paperwork for filling of the tax, payment instructions as well as exempt and non-exempt examples and will be available soon.
Background Information
Background information, along with community conversations on the fiscal health of the City and prior work on ballot measures can be found on the City’s Fiscal Sustainability: A Community Conversation webpage and City Council meeting materials for the BT ordinance:
Continued discussion of tax proceed use will be discussed during the City’s FY 2024 budget process. For more information and dates for Council review of the budget can be found at www.cityofpaloalto.org/budget