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LOS GATOS, CA-The city is refunding 1,000 business license fees this month after rescinding an earlier city auditors’ decision to extend the business license requirement to commercial property owners who lease out their buildings.

Approximately $15,000 in license fees–an average of $150 per business–is being refunded by the town, and letters are being sent to the remaining commercial property holders stating a license will not be required. The fee extension would have generated an additional $85,000 a year for the city.

The city finance department two months ago began notifying commercial property landlords that they now qualified as a business under the town ordinance and needed to apply for a business license. The town code hadn’t been changed, however, it was just being interpreted differently.

The council began to examine the matter after the town received 25 phone calls and five visitors who questioning the legality of the move. Town attorney Orry Korb says the licensing requirement is consistent with the town code. Others said it could easily be as a new business license tax. Council members sided with the latter interpretation, saying that collecting rent does not qualify as employment under Internal Revenue Service standards.

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