CC Ordinance No. 18-2174 amending Chapter 3.12 to Provide for the Collection of Transient Occupancy taxes from Short Term Rentals Using Internet-Based Social Media PlatformsORDINANCE NO. 18-2174
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF CUPERTINO
AMENDING CHAPTER 3.12 OF THE MUNICIPAL CODE TO PROVIDE FOR THE
COLLECTION OF TRANSIENT OCCUPANCY TAXES FROM SHORT-TERM
RENTALS USING INTERNET-BASED/SOCIAL MEDIA PLATFORMS
WHEREAS, since 1965 transient guests have paid a Transient Occupancy Tax (TOT) on
hotel rooms in Cupertino. Like many other California cities, Cupertino uses this funding
to provide essential public services through its general fund; and
WHEREAS, the rate of the TOT has been twelve percent (12 %) since 2011; and
WHEREAS, all short term rental operators who rent accommodations within the City are
subject to the City's TOT ordinance but historically have not paid TOT to the City of
Cupertino; and
WHEREAS, the short-term rentals market is increasingly occupied by internet-
based/social media platforms, such as Airbnb, HomeAway, FlipKey and VRBO. These
businesses operate online marketplaces for owners and/or operators of real property to
lease or rent short-term lodging, operating as a broker and receiving fees for booking
services; and
WHEREAS, internet-based/social media platforms may be able and willing to collect and
remit TOT to the City of Cupertino on behalf of their platform users, including entering
into voluntary collection agreements with the City, which would assist the City's
collection efforts and increase TOT revenue for the City; and
WHEREAS, the City Council finds that amending the TOT ordinance is appropriate and
advisable to define internet-based/social media platforms and provide for the collection
of TOT from owners and/or operators of real property who use these platforms to lease
or rent short-term lodging for short-term rentals, including the authority for the City to
enter into contractual arrangements or voluntary collection agreements with internet-
based/social media platforms for collection of TOT revenue.
NOW, THEREFORE, the Council of the City of Cupertino does ordain as follows:
SECTION ONE -Chapter 3.12 of the Cupertino Municipal Code is hereby amended to
read as follows:
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3.12.010 Short Title.
This chapter shall be known as the "uniform transient occupancy tax ordinance"
of the City.
3.12.020 Definitions.
Except where the context otherwise requires, the definitions given in this section
govern the construction of this chapter:
A. "Person" means any individual, firm, partnership, joint venture, association,
social club, fraternal organization, joint stock company, corporation, estate, trust,
business trust, receiver, trustee, syndicate, or any other group or combination acting as a
unit;
B. "Hotel" means any structure, or any portion of any structure, which is
occupied or intended or designed for short-term occupancy by transients for dwelling,
lodging or sleeping purposes, and includes any hotel, inn, tourist home or house, motel,
studio hotel, bachelor hotel, lodging house, rooming house, apartment house, dormitory,
public or private club, mobile home or house trailer at a fixed location, or other similar
structure or portion thereof;
C. "Occupancy" means the use or possession, or the right to the use or possession
of any room or rooms or portion thereof, in any hotel for dwelling, lodging or sleeping
purposes;
D. "Transient" means any person who exercises occupancy or is entitled to
occupancy by reason of concession, permit, right of access, license or other agreement for
a period of thirty consecutive calendar days or less, counting portions of calendar days
as full days. Any such person so occupying space in a hotel shall be deemed to be a
transient until the period of thirty days has expired unless there is an agreement in
writing between the operator and the occupant providing for a longer period of
occupancy. In determining whether a person is a transient, uninterrupted periods of time
extending both prior and subsequent to the effective date of the ordinance codified herein
may be considered. "Transient" includes persons who book accommodations through
internet-based/social host platforms;
E. "Rent" means the consideration charged, whether or not received, for the
occupancy of space in a hotel valued in money, whether to be received in money, goods,
labor or otherwise, including all receipts, cash, credits and property and services of any
kind or nature, without any deduction therefrom whatsoever;
F. "Operator" means the person who is proprietor of the hotel, whether in the
capacity of owner, lessee, sublessee, mortgagee in possession, licensee, or any other
capacity. Where the operator performs his functions through a managing agent of any
type or character other than an employee, the managing agent shall also be deemed an
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operator for the purposes of this chapter and shall have the same duties and liabilities as
his principal. Compliance with the provisions of this chapter by either the principal or
the managing agent shall, however, be considered to be compliance by both;
G. "Tax Administrator" means the City's Director of Administrative Services or
designee.
H. "Internet-based/social media platform" means a business, such as Airbnb,
HomeAway, FlipKey, and VRBO, that operates an online marketplace for owners and/or
operators of real property to lease or rent short-term lodging, operating as a broker and
receiving fees for booking services.
3.12.030 Imposition.
For the privilege of occupancy in any hotel, each transient is subject to and shall
pay a tax in the amount of twelve percent of the rent charged by the operator. The tax
constitutes a debt owed by the transient to the City, which is extinguished only by
payment to the operator or to the City. The transient shall pay the tax to the operator of
the hotel at the time the rent is paid. If the rent is paid in installments, a proportionate
share of the tax shall be paid with each installment. The unpaid tax shall be due upon
the transient's ceasing to occupy space in the hotel. If for any reason the tax due is not
paid to the operator of the hotel, the Tax Administrator may require that such tax is paid
directly to the Tax Administrator.
3.12.050 Operator's Duties.
Each operator shall collect the tax imposed by this chapter to the same extent and
at the same time as the rent is collected from every transient. The amount of tax shall be
separately stated from the amount of the rent charged, and each transient shall receive a
receipt for payment from the operator. No operator of a hotel shall advertise or state in
any manner, whether directly or indirectly, that the tax or any part thereof will be
assumed or absorbed by the operator, or that it will not be added to the rent, or that, if
added, any part will be refunded except in the manner hereinafter provided. For short-
term rentals conducted through internet-based/social media platforms, the owners
and/or operators of those platforms may be authorized by City to collect and remit taxes,
in lieu of the owners and/or operators of the leased property.
3.12.060 Registration.
Within thirty days after the effective date of the ordinance codified herein, or
within thirty days after commencing business, whichever is later, each operator of any
hotel renting occupancy to transients shall register the hotel with the Tax Administrator
and obtain from him a "Transient Occupancy Registration Certificate" to be at all times
posted in a conspicuous place on the premises. The certificate shall, among other things,
state the following:
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A. The name of the operator;
B. The address of the hotel;
C. The date upon which the certificate was issued;
D. This "Transient Occupancy Registration Certificate" signifies that the person
named on the face hereof has fulfilled the requirements of the Uniform Transient
Occupancy Tax Ordinance by registering with the Tax Administrator for the purpose of
collecting from transients the Transient Occupancy Tax and remitting said tax to the Tax
Administrator. This certificate does not authorize any person to conduct any unlawful
business or to conduct any lawful business in an unlawful manner, nor to operate a hotel
without strictly complying with all local applicable laws, including but not limited to
those requiring a permit from any board, commission, department or office of this city.
This certificate does not constitute a permit.
3.12.070 Reporting and Remitting.
Each operator shall, on or before the last day of the month following the close of
each calendar quarter, or at the close of any shorter reporting period which may be
established by the Tax Administrator, make a return to the Tax Administrator, on forms
provided by him, of the total rents charged and received and the amount of tax collected
for transient occupancies. At the time the return is filed, the full amount of the tax
collected shall be remitted to the Tax Administrator. The Tax Administrator may
establish shorter reporting periods for any certificate holder if he deems it necessary in
order to insure collection of the tax and he may require further information in the
return. Returns and payments are due immediately upon cessation of business for any
reason. All taxes collected by operators pursuant to this chapter shall be held in trust for
the account of the City until payment thereof is made to the Tax Administrator. Where a
transient pays rent in connection with lodging booked via an internet-based/social media
platform, the operator of the property may be relieved of the duty to collect taxes only if
the internet-based/social media platform has entered into an agreement with the City for
the collection and remittance of transient occupancy taxes.
3.12.080 Penalties and Interest.
A. Original Delinquency. Any operator who fails to remit any tax imposed by this
chapter within the time required shall pay a penalty often percent of the amount of the
tax in addition to the amount of the tax.
B. Continued Delinquency. Any operator who fails to remit any delinquent
remittance on or before a period of thirty days following the date on which the remittance
first became delinquent shall pay a second delinquency penalty of ten percent of the
amount of the tax in addition to the amount of the tax and the ten percent penalty first
imposed.
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C. Fraud. If the Tax Administrator determines that the nonpayment of any
remittance due under this chapter is due to fraud, a penalty of twenty-five percent of the
amount of the tax · shall be added thereto in addition to the penalties stated in
subparagraphs A. and B. of this section.
D. Interest. In addition to the penalties imposed, any operator who fails to remit
any tax imposed by this chapter shall pay interest at the rate of one-half of one percent
per month or fraction thereof on the amount of the tax, exclusive of penalties, from the
date on which the remittance first became delinquent until paid.
E. Penalties Merged With Tax. Every penalty imposed and such interest · as
accrues under the provisions of this section shall become a part of the tax herein required
to be paid.
3.12.090 Failure to Collect and Report Tax--Deterrnination of Tax by Tax
Administrator.
If any operator fails or refuses to collect said tax and to make, within the time
provided in this chapter, any report and remittance of said tax or any portion thereof
required by this chapter, the Tax Administrator shall proceed in such manner as he may
deem best to obtain facts and information on which to base his estimate of the tax due. As
soon as the Tax Administrator procures such facts and information as he is able to obtain
upon which to base the assessment of any tax imposed by this chapter and payable by
any operator who has failed or refused to collect the same and to make such report and
remittance, he shall proceed to determine and assess against such operator . the tax,
interest and penalties provided for by this chapter. In case such determination is made,
the Tax Administrator shall give a notice of the amount so assessed by serving it
personally or by depositing it in the United States mail, postage prepaid, addressed to
the operator so assessed at his last known place of address. Such operator may within
ten days after the serving or mailing of such notice make application in writing to the Tax
Administrator for a hearing on the amount assessed. If application by the operator for a
hearing is not made within the time prescribed, the tax, interest and penalties, if any,
determined by the Tax Administrator shall become final and conclusive and immediately
due and payable. If such application is made, the Tax Administrator shall give not less
than five days written notice in the manner prescribed herein to the operator to show
cause at a time and place fixed in said notice why said amount specified therein should
not be fixed for such tax, interest and penalties. At such hearing, the operator may appear
and offer evidence why such specified tax, interest and penalties should not be so
fixed. After such hearing the Tax Administrator shall determine the proper tax to be
remitted and shall thereafter give written notice to the person in the manner prescribed
herein of such determination and the amount of such tax, interest and penalties. The
amount determined to be due shall be payable after fifteen days unless an appeal is taken
as provided in Section 3.12.100 .
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3.12.100 Appeal.
Any operator aggrieved by any decision of the Tax Administrator with respect to
the amount of such tax, interest and penalties, if any, may appeal to the Council by filing
a notice of appeal with the City Clerk within fifteen days of the serving or mailing of the
determination of tax due. The Council shall fix a time and place for hearing such appeal,
and the City clerk shall give notice in writing to such operator at his last known place of
address. The findings of the Council shall be final and conclusive and shall be served
upon the appellant in the manner prescribed above for service of notice of hearing. Any
amount found to be due shall be immediately due and payable upon the service of notice.
3.12.110 Records.
It shall be the duty of every operator liable for the collection and payment to the
City of any tax imposed by this chapter to keep and preserve, for a period of three years,
all records as may be necessary to determine the amount of such tax as he may have been
liable for the collection of and payment to the City, which records the Tax Administrator
shall have the right to inspect at all reasonable times.
3.12.120 Refunds.
A. Whenever the amount of any tax, interest or penalty has been overpaid or paid
more than once or has been erroneously or illegally collected or received by the City
under this chapter it may be refunded as provided in subparagraphs B. and C. of this
section provided a claim in writing therefor, stating under penalty of perjury the specific
grounds upon which the claim is founded, is filed with the Tax Administrator within
three years of the date of payment. The claim shall be on forms furnished by the Tax
Administrator.
B. An operator may claim a refund or take as credit against taxes collected and
remitted the amount overpaid, paid more than once or erroneously or illegally collected
or received when it is established in a manner prescribed by the Tax Administrator that
the person from whom the tax has been collected was not a transient; provided, however,
that neither a refund nor a credit shall be allowed unless the amount of the tax so collected
has either been refunded to the transient or credited to rent subsequently payable by the
transient to the operator.
C. A transient may obtain a refund of taxes overpaid or paid more than once or
erroneously or illegally collected or received by the City by filing a claim in the manner
provided in subparagraph A. of this section, but only when the tax was paid by the
transient directly to the Tax Administrator, or when the transient having paid the tax to
the operator, establishes to the satisfaction of the Tax Administrator that the transient has
been unable to obtain a refund from the operator who collected the tax .
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D. No refund shall be paid under the prov1s10ns of this section unless the
claimant establishes his right thereto by written records showing entitlement thereto.
3.12.130 Actions to Collect.
Any tax required to be paid by any transient under the provisions of this chapter
shall be deemed a debt owed by the transient to the City. Any such tax collected by an
operator which has not been paid to the City shall be deemed a debt owed by the operator
to the City. Any person owing money to the City under the provisions of this chapter
shall be liable to an action brought in the name of the City for the recovery of such
amount.
3.12.140 Violation-Penalty.
Any person who violates the provisions of this chapter shall be guilty of an
infraction and upon conviction thereof shall be punished as provided in Chapter 1.12.
SECTION TWO -CEQA EXEMPTION.
The City Council finds, based on its own independent judgment, that the proposed
amendments to the Cupertino Municipal Code are exempt from requirements of the
California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section
15061(b)(3) in that the proposed amendments are not a project which has the potential for
causing a significant effect on the environment. A notice of Exemption will be filed with
the County Clerk.
SECTION THREE -INCONSISTENCIES REPEALED.
This Ordinance is intended to be controlling on the authority to approve plans and
designs of public improvements, and shall supersede all prior ordinances, resolutions,
rules, or regulations that are in conflict herewith. Any provisions of the Cupertino
Municipal Code, or appendices thereto, or any other ordinance of the City inconsistent
herewith, are repealed only to the extent of such inconsistencies and no further.
SECTION FOUR -IMPLEMENTATION.
The City Council hereby authorizes and directs the City Manager to take any action and
sign any documents necessary to implement this Ordinance.
SECTION FIVE -SEVERABILITY.
If any section, subsection, sentence, clause or phrase of this Ordinance is for any reason
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held by a court of competent jurisdiction to be invalid, such a decision shall not affect the
validity of the remaining portions of this Ordinance. The Council of the City of Cupertino
hereby declares that they would have passed this Ordinance and each section or
subsection, sentence, clause and phrase thereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid.
SECTION SIX-EFFECTIVE DATE; PUBLICATION.
The City Clerk is directed to post and publish this Ordinance in accordance with law in
a newspaper of general circulation printed and published in the County of Santa Clara,
or as otherwise required by law. This ordinance shall take effect thirty (30) days after
adoption.
INTRODUCED at a regular meeting of the City Council of the City of Cupertino the 19th
day of June, 2018 and ENACTED at a regular meeting of the City Council of the City of
Cupertino the 3rd day of July 2018, by the following vote:
Ayes:
Noes:
Absent:
Abstain:
ATTEST:
Grace Schmidt, City Clerk
Members of the City Council
Paul, Chang, Scharf, Vaidhyanathan
None
Sinks
None
APPROVED:
or, City of Cupertino
ST ATE OF CALIFORNIA )
COUNTY OF SANTA CLARA )
CITY OF CUPERTINO )
I, GRACE SCHMIDT, City Clerk and ex-officio Clerk of the City
Council of the City of Cupertino, California, do hereby certify the attached
to be a true and correct copy of Ordinance No. 18-2174 which was enacted
on July 3, 2018, and that it has been published or posted pursuant to law
(G.C. 40806).
IN WITNESS WHEREOF, I have hereunto set my hand and seal
this 9th day of July, 2018.
GRACE SCHMIDT, City Clerk and Ex-officio Clerk
of the City Council of the City of Cupertino, California