How can a Florida city legally raise its local business tax?

Plain-English summary

The City of Vernon, through its attorney, asked the Florida Attorney General's office whether it could increase its local business tax, and also questioned whether a 2009 ordinance that raised the tax was valid. Assistant Attorney General Lagran Saunders responded for Attorney General Pam Bondi.

The office declined to second-guess the city's past actions and presumed the 2009 ordinance valid. It then laid out the general framework. Chapter 205, Florida Statutes, prescribes exactly how a municipality may impose and amend a business tax, and the office concluded that no other means may be used to change the structure or rate. Three routes exist: section 205.0315 lets a local government that had not adopted a business tax adopt one; section 205.0535 allows a reclassification and rate-structure revision, but only for municipalities that adopted a business tax after October 1, 1995, and only if the revision was made before October 1, 2008; and section 205.043(1) sets conditions on a municipal business tax, including the capped percentage increases a city may make above its 1971 rate.

The office pointed to AGO 2014-11, where it had concluded that a city which did not comply with Chapter 205's terms was not authorized to revise its business tax ordinance. The letter cited Alsop v. Pierce, 19 So. 2d 799 (Fla. 1944), for the principle that where the Legislature prescribes the way a thing must be done, that is an implied prohibition on doing it any other way.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: At the time, could a Florida city raise its business tax just by majority vote of the council?
A: Not on its own. The office said a city had to fit one of Chapter 205's specific routes. A vote that did not comply with the statute's conditions would not authorize a valid increase, as the office had concluded in AGO 2014-11.

Q: What was the section 205.0535 reclassification route?
A: It let municipalities that had adopted a business tax after October 1, 1995, reclassify businesses and set new rate structures, subject to an equity study commission and caps on the increases. But the opinion noted its window closed: the reclassification had to be done before October 1, 2008.

Q: Did the opinion say Vernon's 2009 ordinance was valid?
A: No. The office expressly declined to comment on actions already taken and presumed officially passed acts valid. It offered only general observations about how the law allowed a business tax to be set or changed.

Background and statutory framework

Chapter 205, Florida Statutes, is the Local Business Tax Act. It governs how counties and municipalities levy what used to be called occupational license taxes. The opinion is an informal advisory letter, so it is general guidance rather than a numbered formal opinion.

The framework the office described has three pieces. Section 205.0315 addresses local governments that had not adopted a business tax ordinance or resolution and lets them adopt one. Section 205.0535 authorizes a reclassification and rate-structure revision, limited to municipalities that adopted a business tax after October 1, 1995, and required to be completed before October 1, 2008, after an equity study commission process and within statutory caps. Section 205.043(1) imposes conditions on a municipal business tax: the tax must rest on reasonable, uniform classifications; absent use of section 205.0535 or a new ordinance under section 205.0315, the tax may not exceed the rate in effect for the year beginning October 1, 1971, subject to specified percentage increases the governing body could make beginning in 1980; and a receipt is valid for no more than one year.

Citations and references

Statutes:

• Section 205.0315, Florida Statutes (adoption of a business tax ordinance)
• Section 205.0535, Florida Statutes (reclassification and rate-structure revision)
• Section 205.043(1), Florida Statutes (conditions on a municipal business tax)
• Section 205.033(4), Florida Statutes (county distribution to municipalities)

Cases:

• Alsop v. Pierce, 19 So. 2d 799, 805 (Fla. 1944) (prescribed statutory mode is an implied prohibition on other methods)

Prior Attorney General opinion referenced:

• AGO 2014-11 (city that did not comply with Chapter 205 not authorized to revise its business tax)

Source

• Landing page: https://www.myfloridalegal.com/ag-opinions/municipalities-business-tax
• Original PDF: https://www.myfloridalegal.com/print/pdf/node/8065

Original opinion text

January 12, 2016

Ms. Michelle Blankenship Jordan
Attorney for the City of Vernon
1512 Highway 90
Chipley, Florida 32428

Dear Ms. Blankenship Jordan:

On behalf of the city council for the City of Vernon, you have asked for assistance in determining whether the city may increase its local business tax. You also question the validity of the council’s adoption in 2009 of an ordinance increasing the local business tax. Attorney General Bondi has asked that I respond to your inquiry.

While this office will not comment upon the actions which have already been taken by the city council and will presume the validity of acts that were officially passed, the following general observations regarding local business taxes are offered to be of assistance.

Section 205.0315, Florida Statutes, authorizes the adoption of a business tax ordinance beginning October 1, 1995, for those counties and municipalities that have not adopted a business tax ordinance or resolution. You state, however, that the City of Vernon passed an ordinance in 2009 imposing a $25 license fee for different categories of businesses operating within the city’s jurisdiction. Prior to that, the city’s business tax ordinance passed in 1977 imposed varying fees from $2.50 – $25.00 for different businesses.

Section 205.0535, Florida Statutes, authorizes reclassification and rate structure revisions of a municipality’s existing business tax. Its application, however, is limited to those municipalities which have adopted by ordinance a local business tax after October 1, 1995, and made such reclassifications and rate structure revisions before October 1, 2008.[1] Section 205.043(1), Florida Statutes, provides conditions for the levy of a business tax by municipalities:

“(1) The following conditions are imposed on the authority of a municipal governing body to levy a business tax:

(a) The tax must be based upon reasonable classifications and must be uniform throughout any class.

(b) Unless the municipality implements s. 205.0535 or adopts a new business tax ordinance under s. 205.0315, a business tax levied under this subsection may not exceed the rate in effect in the municipality for the year beginning October 1, 1971; however, beginning October 1, 1980, the municipal governing body may increase business taxes authorized by this chapter. The amount of the increase above the tax rate levied on October 1, 1971, for taxes levied at a flat rate may be up to 100 percent for business taxes that are $100 or less; 50 percent for business taxes that are between $101 and $300; and 25 percent for business taxes that are more than $300. Beginning October 1, 1982, an increase may not exceed 25 percent for taxes levied at graduated or per unit rates. Authority to increase business taxes does not apply to receipts or licenses granted to any utility franchised by the municipality for which a franchise fee is paid.

(c) A receipt is not valid for more than 1 year and all receipts expire on September 30 of each year, except as otherwise provided by law.”

Thus, the Legislature has prescribed the manner in which a municipality may enact and amend its business tax ordinances and no other means may be used to effect a change in the structure and rate of business taxes imposed.[2] In Attorney General Opinion 2014-11, this office was asked whether a city was authorized to increase its business tax rates by a super majority vote of the city’s governing council or by the authority granted in section 205.043, Florida Statutes. After discussing the specific provisions in Chapter 205, Florida Statutes, governing the imposition and amendment of a business tax ordinance, the opinion concluded that the municipality had not complied with the statute’s terms and, therefore, was not authorized to revise its business tax ordinance.

I trust that these informal comments will be of assistance to you in further advising the city of its options in imposing a business tax.

Sincerely,

Lagran Saunders
Assistant Attorney General

ALS/tsh

[1] Section 205.0535, Fla. Stat., provides:

“(1) By October 1, 2008, any municipality that has adopted by ordinance a local business tax after October 1, 1995, may by ordinance reclassify businesses, professions, and occupations and may establish new rate structures, if the conditions specified in subsections (2) and (3) are met. . . .

(2) Before adopting a reclassification and revision ordinance, the municipality or county must establish an equity study commission and appoint its members. Each member of the study commission must be a representative of the business community within the local government’s jurisdiction. Each equity study commission shall recommend to the appropriate local government a classification system and rate structure for business taxes.

(3)(a) After the reclassification and rate structure revisions have been transmitted to and considered by the appropriate local governing body, it may adopt by majority vote a new business tax ordinance. Except that a minimum tax of up to $25 is permitted, the reclassification may not increase the tax by more than the following: for receipts costing $150 or less, 200 percent; for receipts costing more than $150 but not more than $500, 100 percent; for receipts costing more than $500 but not more than $2,500, 75 percent; for receipts costing more than $2,500 but not more than $10,000, 50 percent; and for receipts costing more than $10,000, 10 percent; however, in no case may the tax on any receipt be increased more than $5,000.

(b) The total annual revenue generated by the new rate structure for the fiscal year following the fiscal year during which the rate structure is adopted may not exceed:

1. For municipalities, the sum of the revenue base and 10 percent of that revenue base. The revenue base is the sum of the business tax revenue generated by receipts issued for the most recently completed local fiscal year or the amount of revenue that would have been generated from the authorized increases under s. 205.043(1)(b), whichever is greater, plus any revenue received from the county under s. 205.033(4).

2. For counties, the sum of the revenue base, 10 percent of that revenue base, and the amount of revenue distributed by the county to the municipalities under s. 205.033(4) during the most recently completed local fiscal year. The revenue base is the business tax revenue generated by receipts issued for the most recently completed local fiscal year or the amount of revenue that would have been generated from the authorized increases under s. 205.033(1)(b), whichever is greater, but may not include any revenues distributed to municipalities under s. 205.033(4).

(c) In addition to the revenue increases authorized by paragraph (b), revenue increases attributed to the increases in the number of receipts issued are authorized.

(4) After the conditions specified in subsections (2) and (3) are met, municipalities and counties may, every other year thereafter, increase or decrease by ordinance the rates of business taxes by up to 5 percent. However, an increase must be enacted by at least a majority plus one vote of the governing body.

(5) This chapter does not prohibit a municipality or county from decreasing or repealing any business tax authorized under this chapter. By majority vote, the governing body of a county or municipality may adopt an ordinance repealing a local business tax or establishing new rates that decrease local business taxes and do not result in an increase in local business taxes for a taxpayer. Such ordinances are not subject to subsections (2) and (3).

(6) A receipt may not be issued unless the federal employer identification number or social security number is obtained from the person to be taxed.”

[2] See Alsop v. Pierce, 19 So. 2d 799, 805 (Fla. 1944) (where Legislature prescribes the mode, that mode must be observed; express statutory direction as to how a thing is to be done is implied prohibition of its being done in any contrary manner).