The extreme disruptions of COVID-19 have put many businesses in a position where they face difficulty paying their business license taxes in full. At the same time, the revenue from business license taxes are still vitally necessary to provide the services businesses need — police, fire, sanitation and others.
To help businesses manage their business license tax payments during the COVID-19 crisis, cities and towns have several options they can consider.
Waiving penalties or extending due dates
Cities could choose to maintain their existing business license tax due dates, but waive penalties for nonpayment until a later date. Cities could also simply extend the due date for the tax, thereby giving businesses more time to pay.
However, it's important to understand the potential problems either of these options could cause.
Consider a case where a city extends a due date for its 2020 business license tax. When the delayed due date finally does come around, it could be only months away from the regular due date for the 2021 business license tax bill. Business owners could then be confused and angry about the requirement that they pay the tax twice within one year. Waiving penalties can ease this concern.
Also, keep in mind the accounting requirements that exist if a city receives payments in a different fiscal year than when those payments were owed.
Setting up a plan for incremental payments allows businesses to spread out the business license tax they owe to the city. When using this route, be sure to have a drop-dead date that full payment must be made, such as September 30 or December 30. The plan could be
- monthly for a certain amount of months or date,
- bimonthly for a certain amount of months or date, or
- quarterly for a certain amount of months or date.
Discounts and declining discounts
Offering a discount would involve providing a reduction for the payment by the business if they pay their business license tax by a certain date. An example would be a 20% reduction in the amount owed if paid in full by June 30.
Cities could provide a declining discount to the business based on how quickly the payments are submitted to the city. This could be a 20% reduction in the amount paid by June 30, but only a 10% reduction in the amount if paid by September 30.
Credit card fees
Finally, consider waiving any credit card fees that the city may have imposed, allowing the business to pay the tax using a credit card.
For questions on business licensing policies and procedures, contact Research and Legislative Liaison Melissa Harrill at email@example.com or 803.933.1251. Find more resources online.