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businesses to pay the tax as they may not fall neatly within the current definitions of businesses that must pay the tax based on office expenses. To address that concern, staff recommends that the ordinance be amended to define a new category of businesses--non revenue producing businesses--that will broadly cover those businesses that do not generate gross receipts themselves but do provide services to the same business located outside the City that does generate revenue. Finally, Pleasanton has been attracting a number of new businesses that intend to be revenue producing (unlike the businesses described in the previous paragraph that never intend to be revenue producing in Pleasanton) but may take a year or more to be in that mode. In the interim, the business may have significant office space and employ a number of people in Pleasanton but yet generate relatively few gross receipts. Hence, they would pay relatively little tax compared to a similarly situated non revenue producing business. In order to address this inequity, staff recommends that the ordinance be amended to include a definition of a "start up company" that will pay the license tax based on office expenses, just like the non revenue producing business described above. Once gross receipts equal or exceed the office expenses, then the tax will be calculated on gross receipts. These changes will enable the business license staff to administer the ordinance in a fair and equitable manner and will clarify certain existing ambiguities in the ordinance. For these reasons, staff recommends that these amendments be adopted. Submitted by: C David P. Culver Finance Director Approved y: f Nelson Fialho City Manager Attachment: 1. Proposed Ordinance Amending City's Business License Tax Page 3 of 3