North Bay small businesses worry about eventual tax bill in California’s $500M coronavirus relief plan
North Bay small businesses are approaching with caution about participating in the multipronged program announced by California Gov. Gavin Newsom Monday offering temporary tax relief in a $500 million package.
That plan includes $25,000 cash allotments to those who apply for a COVID relief grant. It also involves a small business hiring credit of up to $100,000 through Jan. 15 for qualified owners. Few details are available on how this works and who qualifies.
Regional chamber executives, retailers, restaurateurs and accountants from Napa County west to Marin agree the program sounds like a noble gesture they’re grateful for.
Still, the question remains is the plan enough as they await word of the state’s decision on more, probable shutdown restrictions to stem the tide of the latest coronavirus surge.
For instance, the state is offering an automatic, three-month, “penalty-free” extension for businesses to pay their 7.25% sales taxes not until next April. Normally it would be due in January.
Some say the tax relief only delays the inevitable though.
“Of course, if you’re really on the ropes, anything helps. But why is it suddenly going to be better in three months?” Santa Rosa accountant Jon Dal Poggetto said.
A business still has to pay it at some point. And when it does, the bill could amount to six months of back taxes to the state instead of three. Some company operators fear any other setback could be the last straw.
“I’m closed and not making money anyway,” said Jean Saya, owner of Cal Skate. The iconic landmark in Rohnert Park, which has been around since 1976, was shut down in mid-March and only partially open.
“What has come out makes the state look good,” she said.
Saya wants to apply for a cash grant but refuses to sign on to any loan program.
“I’m not interested in borrowing more money. I can’t afford to go into debt. If I have to borrow, I’ll put up a for-sale sign,” she said. The hiring tax credit doesn’t help her either because she has no employees left, teaching the occasional class herself.
Saya looks back fondly at when she bought the rink in 2003, through the help of another local business, Redwood Credit Union, to get her off the ground. Today, the credit union stands by its continued support.
“Cal Skate has been a long-time valued member, and our business team and I are continuing to work closely with them to help them weather this difficult year,” said Diane Berthinier, senior vice president of lending at Redwood Credit Union.
At least businesses have each other
One silver lining to this economic turmoil may come in the form of community teamwork.
Steve Elliott, who runs Fundemonium, a toy store in Rohnert Park, and serves in a business group alongside Saya, told the Business Journal he would pass on state relief because his business is thriving at a normal, pre-COVID-19 rate. But others aren’t.
“We’ve been fortunate we’re doing well enough,” Elliott said, explaining that families have opted to buy many games and puzzles to keep them occupied at home.
“They still need something to do,” he said.
He insisted he’d rather see any $25,000 cash grant he could request go toward other businesses’ electric bills.
He’s keeping his fingers crossed because he’s moved in and out of the essential versus non-essential category a few times and like many is concerned about another state shelter-in-place order.
Either way, Elliott would caution any business owner not to take a tax delay.
“It doesn’t really work. All this does is get you into trouble later,” he said, adding the accounting books may be thrown off.
Others agree.
“Well, a sales tax deferral is not obviously as good as a tax credit,” Iron Springs Pub co-owner Anne Altman said.
The Fairfax proprietor may “take a look” at the cash grant part of the program to help “scrape through and pull together enough” through the tough winter.
The sentiment was shared on the other side of the North Bay in Napa.
Ken Frank of La Toque restaurant installed outdoor heaters to make his patrons comfortable during the winter, while staring at the cold, harsh reality that many are predicted to fold under duress. The National Restaurant Association recently reported that at least 100,000 eateries have closed across the United States.
Despite the uphill battle against the elements, Frank has no appetite for “putting off” sales tax payments.
“It’s nice (the governor) is offering something, especially without the federal government’s help, but that (tax bill) could quickly add up to $20,000,” he said.
Help takes many forms
Santa Rosa Metro Chamber of Commerce Peter Rumble is not surprised by the outpouring of help among businesses helping others.
