CITYWIDE — Santa Monicans will see an increase in their bills for everything from clothing to durable goods beginning Friday when the half-cent sales tax increase passed in November takes effect.
The additional tax will be applied to the total amount paid for most items, with some exclusions for cars and delivered goods, and bring the tax rate from 9.75 percent to 10.25 percent.
Voters approved the tax, called Measure Y, on Nov. 2. At the same time, voters passed Measure YY, a non-binding add-on to prove to city officials that Santa Monicans wanted half of the money gained from Measure Y to go to the Santa Monica Malibu Unified School District.
City staff maintains that it expects $11.4 million from the tax in its first year, said Finance Director Carol Swindel.
Depending on what kind of business you are, that could have a greater or lesser impact.
Items bought outside the city and shipped into city limits, including bulky machines like washers or dryers, will be taxed on the total cost plus shipping, although if a customer trucks it over themselves, the tax will not apply.
Similarly, car buyers will only have the tax assessed if the car is licensed in Santa Monica. Even cars bought within city limits but licensed elsewhere will not see an increase in their purchase price.
“If I’m buying a car, I will notice it,” said Mark Wain, owner of the Luxxe Caffe. “If I’m buying a latte, I probably won’t.”
Wain, a member of the Montana Avenue Business Association, said that the tax will affect business owners on both the front and back ends of a transaction, meaning that they’ll see the effects when dealing with the customer and when reporting to the Board of Equalization come tax time.
There’s also the intermediary step of preparing businesses for the transition, which could be reprogramming computers to collect the appropriate amount of tax, or training workers to punch in the right numbers at the register.
In Wain’s case, he’ll have to teach his machine new tricks on Thursday night so when the early-morning coffee crowd descends on the Luxxe, his business is ready.
“It’s a little bit of an ordeal for me, but not crazy,” Wain said.
The Montana business community tends to see the tax as a positive, Wain said.
“The majority of the merchants on Montana Avenue all feel it’s going to a good cause. We’re united in that,” Wain said.
Measure Y had its opponents, largely from businesses operating on a slim margin, said Brian Chase, who heads government relations for the Santa Monica Chamber of Commerce.
The chamber stayed neutral on Measure Y because its board was divided on the issue, but threw its support behind the revenue-sharing advisory measure.
“Some businesses on razor-thin margins are against any disincentive to shop in Santa Monica,” Chase said. “Others thought it would encourage more residents to shop in the city to help our local school district.”
In November, nobody knew exactly how the revenues would be split between the school district and City Hall.
Four months later, it appears that city officials and the school district have agreed to a procedure where City Hall gives the school district what it projects will be half of the transaction and use tax revenue each month.
Should the school get more or less than its fair share, City Hall will adjust the next month’s payment, Swindel said.
The City Council will address the matter at its April 22 meeting.
SMMUSD will use the tax revenue to shore up uncertain finances, said Jan Maez, chief financial officer for the district.
“We’re anticipating very large cuts in revenue from the state,” Maez said. “This allows us to maintain some of the wonderful things we’ve already got, without having to cut as deeply as we would have had to without it.”
School districts across the state face huge reductions in funding, especially if legislators do not agree to put tax extensions on the ballot that would maintain funding for schools.
It is unlikely that those extensions could make it onto a June ballot.