Sausalito maritime business wins taxation appeal

The Sausalito City Council has voted in favor of a shipyard that appealed $66,000 in business license taxes and penalties.

The unanimous decision Tuesday concluded that city consultants and officials misinterpreted the tax code. The two-hour hearing also revealed that the business license chapter, which was updated in 2018 and put businesses into four categories with different tax rates, omitted maritime businesses.

That discovery, and the observation that the code does not mention other businesses like auto repair shops, prompted a larger discussion of whether the city might have erred elsewhere.

“May I suggest … that we just have staff return to us with a plan for how to treat other businesses?” Councilmember Ian Sobieski said. “So that upholding the appeal does not set precedent.”

“I’m prepared to move forward to grant the appeal and make the determination that there is no clear category applicable,” Mayor Steven Woodside said. “And then ask staff to come back and take a look at what we might do prospectively to clarify this going forward.”

The discussion was prompted by an appeal of a “tax category reclassification” by KKMI Sausalito, a marine repair and maintenance yard at Clipper Yacht Harbor, a staff report said. The city granted it permits to operate in 2010.

Last fall, KKMI was randomly audited by the city’s tax consultant. The firm concluded the boatyard belonged in a bracket for “service and professional businesses.” Previously, the boatyard had been in a lower tax bracket that includes manufacturing and “processing any goods, wares, merchandise or commodities at a fixed place of business.”

The consultant and city finance staff reassigned KKMI to the service and professional businesses bracket. It then imposed a $36,127 assessment and $29,920.80 penalty, which the shipyard appealed.

Angeline Loeffler, the city finance director, proposed waiving the taxes and fines at the appeal hearing, but keeping KKMI in the service and professional businesses category.

“I suspect that maybe some of the other reasons that colleagues of mine have not brought this matter to your attention and brought up this discrepancy is because we do keep track of these matters,” said KKMI co-founder Paul Kaplan.

“If you really want to send a message that you embrace the maritime industry and want them here, don’t triple our business license,” he said.

During their discussion, members of the council praised KKMI as a model waterfront business and supported the appeal, saying the absence of maritime enterprises in the business license code raised concerning issues that should be addressed.

“I think it’s clear, based on the feedback tonight, how much we really do cherish our maritime businesses,” said Vice Mayor Melissa Blaustein. “And perhaps we do need a more specific tax code that allows our maritime businesses to thrive, and we should be working toward if further businesses do come out of the woodwork as a result of this appeal.”