Manhattan Beach City Council says ‘No’ to business license tax for real estate agents
Members of the real estate community cheered and applauded the Manhattan Beach City Council Tuesday night for throwing out a staff proposal that would levy a business license tax on Realtors.
Roughly 75 agents and brokers stormed Manhattan Beach City Hall ready to argue that the city does not have the legal authority to impose the tax and that it is not applicable to agents.
The item was unanimously dismissed by council before any had an opportunity to plead their case.
“We’re already collecting the tax from the brokers,” Mayor Mitch Ward said. “That’s enough for me right now. Staff, do not collect the tax.”
For decades, the municipal code has required the tax from anyone earning revenue and engaged in business in the city. However, agents operating in Manhattan Beach have never been required to pay it since they must operate under supervision brokers.
The recent proposal came after Realtors in April began receiving notices requesting they obtain and pay for business licenses.
“We have simply not collected the tax for a number of years,” said Director of Finance Bruce Moe. “We have a handful of agents who have paid it voluntarily. We came across a number of DBAs [legal business announcements] and contacted them.”
At a July 6 Finance Subcommittee meeting, staff further discussed applying the code to agents by classifying them as independent contractors due to several reasons, including their filing of 1099 tax forms, instead of W-2 forms.
Director of Government Affairs for the South Bay Association of Realtors David Kissinger said that not only was the real estate community not properly informed of the proceedings, but that agents are exempt from the tax.
“The city does not have sufficient authority to levy this tax on real estate agents,” he said in an interview. “It’s not enough to look at a 1099 and say they’re independent contractors.”
Ultimately, the ambiguity of whether agents are independent contractors led council to forego imposing the tax.
“The ultimate question is going to come down to a gray area,” Councilmember Nick Tell said. “There’s a big question mark whether they are employees.”
“Businesses don’t need to get hit any more right now,” Councilmember Portia Cohen added. “They need a break.”
Prior to Tuesday’s meeting, several agents emailed council members to oppose the proposal. Agents from Shorewood Realtors met privately with Councilmembers Tell and Wayne Powell, according to agent Susan Sweeney.
“I think the council just had a really interesting and thoughtful discussion,” said David Kissinger, director of Government Affairs for the South Bay Association of Realtors. “Ultimately, they did the right thing and I am pleased with the outcome.” ER