Can a Florida city that adopted its local business tax before 1995 reclassify or restructure that tax today, given the statutory windows in section 205.0535?

Plain-English summary

The City of St. Petersburg wanted to update its local business tax to reflect modern transportation. The City had adopted its business tax ordinance in 1994 and wanted to revisit the $65-per-vehicle tax on "vehicles for hire," which made less sense after the Legislature in 2017 enacted section 627.748, expressly preempting local regulation of "transportation network companies" (Uber, Lyft, etc.) and prohibiting a business tax against them.

Senior Assistant Attorney General Ellen B. Gwynn explained the awkward statutory architecture and concluded that the City could not do most of what it wanted.

Section 205.0535 was created in 1993 to require local governments to use an equity study and follow a structured process when they reclassify businesses, professions, and occupations or establish new rate structures. As written today (after the 2007 amendment), subsection (1) provides that "[b]y 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."

That language opens the door for cities that adopted their business tax between 1995 and 2008. St. Petersburg did not. Its tax was adopted in 1994, before the open window. So St. Petersburg cannot use subsection (1) today to reclassify or restructure.

The only sideways path is section 205.0315, which lets a local government that had no business tax before 1995 to enact one based on an adjacent or comparable government's properly-implemented section 205.0535 ordinance. That does not help St. Petersburg either, because the section is for governments that did not have a tax pre-1995, and St. Petersburg did.

The AG also analyzed subsection (5), which lets municipalities decrease or repeal the tax. Subsection (5) does not authorize eliminating the tax on a particular classification. Op. Att'y Gen. Fla. 2010-41 had concluded that exempting one class of businesses from an existing tax amounts to creating a tax exemption, which a municipality lacks authority to do absent a statutory exemption in chapter 205.

The City does have one option under subsection (5): it can establish "new rates that decrease local business taxes" within an existing classification. The AG read this as letting the City reduce the rate that applies to a class. Section 205.043 still requires "reasonable classifications" and uniformity within a class, so a rate reduction must be uniform within the class. The Court's distinction between "rate" and "rate structure" in City of Tallahassee v. Mann and Polk County v. Fla. Public Serv. Comm'n supports this reading: the City can change the dollar amount within a classification, but cannot recompose the classification system itself.

The practical bottom line for St. Petersburg: it can lower the vehicle-for-hire tax across the board within that class, but cannot abolish the class or establish a new "transportation network company" classification. Modernizing the tax structure to keep up with new business models requires legislative help, not just city action.

Currency note

This opinion was issued in 2018. 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.

Background and statutory framework

Chapter 205 of the Florida Statutes is the local business tax framework. Section 205.0535 was enacted in 1993 (Chapter 93-180) to add equity-study and rate-revision procedures. Originally, subsection (1) gave any municipality or county until October 1, 1995, to reclassify and establish new rate structures using the equity-study process. The 2007 amendment (Chapter 2007-97) re-opened the window: any municipality that had adopted its business tax after October 1, 1995, had until October 1, 2008, to reclassify and restructure. Both windows are now closed.

Subsection (4) authorizes biennial 5% rate increases by majority-plus-one vote, but does not permit reclassification.

Subsection (5), added in 2007 and amended in 2014 (Chapter 2014-38), authorizes the local government to decrease or repeal the tax. The text reads: "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."

The opinion's reading of "establishing new rates that decrease" is that the local government can change the rate (dollar amount or percentage) within an existing classification, but cannot reorganize the classification system. The "rate"/"rate structure" distinction comes from public-utility regulation cases (City of Tallahassee v. Mann; Polk County v. Public Serv. Comm'n), where "rate" is the dollar amount charged for a particular service or amount of consumption, and "rate structure" is the classification system used to differentiate rates.

Section 205.043(1)(a) requires the local business tax to be "based upon reasonable classifications" and "uniform throughout any class." So a rate change must apply to the entire class.

Section 205.022(3) defines "classification" as "the method by which a business or group of businesses is identified by size or type, or both." This was the technical anchor for the AG's reading that a city cannot single out one business or one subset of a class for special tax treatment without going through the proper reclassification process.

Common questions

Q: Why is St. Petersburg's pre-1995 adoption so disqualifying?
A: Section 205.0535's reclassification authority was structured as a series of windows tied to specific adoption dates. The 1993 enactment offered a window for governments that had a tax to reclassify by October 1, 1995. The 2007 amendment offered another window for governments that adopted a tax between October 1, 1995, and October 1, 2008. There is no window for pre-1995 adopters who missed the 1995 deadline.

Q: Can St. Petersburg ask the Legislature for an updated reclassification window?
A: That is the natural legislative remedy. The Legislature could amend section 205.0535(1) to open a new reclassification window for any city, regardless of original adoption date. The opinion does not address that hypothetical.

Q: What can St. Petersburg do about transportation network companies under the existing tax?
A: Probably nothing useful. Section 627.748(15) explicitly bars local business taxes against transportation network companies. The City cannot create a new tax classification for them, and the existing vehicle-for-hire classification does not apply to them. The City can lower or eliminate the existing vehicle-for-hire tax (an across-the-board rate change), but cannot tax TNCs.

Q: Could St. Petersburg eliminate the vehicle-for-hire tax entirely?
A: Yes, by repealing the tax for that classification under subsection (5). The AG opinion clarified that a full repeal is allowed; only carving out one class of taxpayer for an exemption is not. A full repeal of the vehicle-for-hire classification, applied uniformly, would be an authorized rate change to zero.

Q: Is there a difference between "rate" and "rate structure"?
A: Yes, and it's central to the opinion. City of Tallahassee v. Mann defined "rate" as the dollar amount charged and "rate structure" as the classification system used to justify different rates. Subsection (5) of section 205.0535 lets the City change rates downward, not the structure. Subsection (1) (the closed window) is what would have allowed a structural overhaul.

Citations

Statutes:

• §§ 205.022(3), 205.0315, 205.0535, 205.043, Fla. Stat. (2018)
• § 627.748, § 627.748(15), Fla. Stat. (2018)
• Ch. 93-180, Laws of Fla.; Ch. 2007-97, Laws of Fla.; Ch. 2014-38, Laws of Fla.

Cases:

• Alsop v. Pierce, 19 So. 2d 799 (Fla. 1944)
• Sun Coast Int'l Inc. v. Dep't of Bus. Reg., 596 So. 2d 1118 (Fla. 1st DCA 1992)
• City of Tallahassee v. Mann, 411 So. 2d 162 (Fla. 1981)
• Polk County v. Fla. Public Serv. Comm'n, 460 So. 2d 370 (Fla. 1984)
• Ops. Att'y Gen. Fla. 2010-41; 2002-25; 1995-46; 1996-83; 2003-51; 2002-81

Source

• Landing page: https://www.myfloridalegal.com/ag-opinions/local-business-tax-revision
• Original PDF: https://www.myfloridalegal.com/print/pdf/node/8025

Original opinion text

Ms. Jacqueline M. Kovilaritch

City Attorney

City of St. Petersburg

Post Office Box 2842

St. Petersburg, Florida 33731-7608

Dear Ms. Kovilaritch:

We are in receipt of your letter on behalf of the City of St. Petersburg City Council requesting an opinion about the City’s authority under section 205.0535(1), Florida Statutes (2018), to enact a new or revised rate structure for its business tax. Attorney General Bondi has asked me to respond to your inquiry.

Based upon the facts outlined in your letter, section 205.0535 does not authorize the City to reclassify the businesses, professions, and occupations subject to its local business tax, nor may it eliminate particular classifications within the business tax or establish a new rate structure. The City may reduce a tax rate only if the new rate is uniform within the tax classification.

Factual Background:

St. Petersburg adopted a business tax ordinance in 1994. You state that the City would like to revisit the business tax on vehicles for hire, which is required to be paid on a per-vehicle basis at a rate of $65. You point out that in 2017, the Legislature enacted section 627.748, Florida Statutes, which expressly preempts regulation of transportation network companies, which are entities that use a digital network to connect riders to drivers of vehicles that are not taxis, vehicles for hire, etc. The law prohibits local governments from levying a business tax against such companies.[1] The City would like to change its business tax ordinance to take into account “emerging technologies and business models.”

The City enacted its 1994 local business tax ordinance pursuant to an equity study conducted in compliance with section 205.0535. That law, created in 1993,[2] provided in subsection (1), in part:

“(1) By October 1, 1995, any municipality or county 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.”

Subsections (2) and (3) required the municipality or county to prepare an equity study recommending “a classification system and rate structure for business taxes.” The local government had the discretion to then adopt the recommendations in a business tax ordinance by majority vote of the governing body, with certain specified limitations.

Subsection (4) authorized a process of subsequent biennial review of tax rates:

“(4) After the conditions specified in subsections (2) and (3) are met, municipalities and counties may, every other year thereafter, increase by ordinance the rates of local occupational taxes by up to 5 percent. The increase, however, may not be enacted by less than a majority plus one vote of the governing body.”

In 2007, the Legislature amended section 205.0535(1),[3] changing the dates as follows:

“(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.”

(Emphasis added.)

Can the City change its classifications and rate structure?

St. Petersburg did not adopt a local business tax between October 1, 1995, and October 1, 2008, thus, cannot reclassify and establish a new rate structure under this provision. The only exception to the limitation in subsection (1) is found in section 205.0315, Florida Statutes (2018), which allows a local government that had not adopted a business tax prior to October 1, 1995, to enact a business tax ordinance based upon that of an adjacent or comparable local government that had properly implemented section 205.0535. This cannot apply to St. Petersburg, however, because the provision only authorizes a new tax first adopted after 1995, whereas St. Petersburg had adopted its tax in 1994.[4]

Therefore, under section 205.0535(1), the Legislature has provided no authority to the City at this time to amend its existing local business tax; to enact a new ordinance to reclassify the businesses, professions, and occupations subject to its 1994 tax; or to revise the tax structure therein.[5] Nothing in the statute precludes the City from performing a new equity study if it so chooses, but neither a new study nor the City’s 1994 study can provide the basis for enacting a new reclassification and rate structure ordinance outside the statutory time frames. “When the controlling law directs how a thing shall be done that is, in effect, a prohibition against its being done in any other way.”[6]

Can the City eliminate or reduce the tax on certain occupational classifications?

You also ask whether subsection 205.0535(5) would allow St. Petersburg to eliminate a particular tax, such as the tax on vehicles for hire/public vehicles. Subsection (5) provides:

“(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).”[7]

(Emphasis added.)

Subsection (5) does not authorize the action you propose. Eliminating the tax on a single business, profession, or occupation would constitute a tax exemption, which the municipality is not authorized to do. In Attorney General Opinion 2010-41, this office concluded that an amendment to a local business tax so that it no longer applied to certain individuals or entities, constituted the establishment of a tax exemption that is not authorized in chapter 205:[8]

“[M]unicipalities have been granted the authority to levy local business taxes for the privilege of engaging in or managing businesses, professions, or occupations within their jurisdictions. Several exemptions and partial exemptions are enumerated in Chapter 205, Florida Statutes, and, as this office has consistently found, absent a specific statutory exemption from the local business tax, a municipality or county may not create new exemptions.”

(Footnotes omitted.)

It does appear, however, that the provision in subsection (5) authorizing a municipality to “establish new rates that decrease local business taxes” would allow the City to decrease the tax applicable to a particular tax classification. Chapter 205 does not contain a definition of “rate,” but “tax rate” is defined in Black’s Law Dictionary as “a mathematical figure for calculating a tax, usually expressed as a percentage.”[9] Thus, the amount of a tax, or the percentage used to determine the amount, that is charged to a business, profession, or occupation may be changed if the new rate reduces the tax owed. Any such rate reduction, however, would still have to comply with section 205.043, Florida Statutes (2018), which provides, in part:

“(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.”

(Emphasis added.) “Classification” in chapter 205 refers to the size or type of a business or group of businesses.[10] So the City may reduce a tax rate, so long as such rate applies uniformly within the entire class to which the rate applies.

It is therefore my opinion that section 205.0535 does not authorize the City of St. Petersburg to reclassify the businesses, professions, and occupations within its local business tax, or to revise its rate structure. The City may reduce a tax rate so long as such rate is uniform within the tax classification.

Sincerely,

Ellen B. Gwynn

Senior Assistant Attorney General

EBG/tsh

[1] Section 627.748(15), Fla. Stat. (2018).

[2] Ch. 93-180, Laws of Fla. This office discussed the procedures enacted in this law in Op. Att’y Gen. Fla. 1995-46.

[3] Ch. 2007-97, Laws of Fla.

[4] “Beginning October 1, 1995, a county or municipality that has not adopted a business tax ordinance or resolution may adopt a business tax ordinance.” Section 205.0315, Fla. Stat. (2018) (emphasis added). See Ops. Att’y Gen. Fla. 1996-83 (Putnam County enacted a local business tax in 1982, thus, could not adopt a new tax in 1996 under § 205.0315); 2003-51 (Nassau County enacted a local business tax in 1972, and thus did not fall within the scope of § 205.0315).

[5] See Senate Professional Staff Analysis and Economic Impact Statement on CS/SB 656, p. 3, dated March 8, 2007, Florida Senate, explaining that the bill (incorporated into CS/SB 1178 [Ch. 2007-97, Laws of Fla.]) “amends s. 205.0535, F.S., to allow a municipality that adopted a local business tax ordinance on or after October 1, 1995, to reclassify businesses, professions, and occupations and to establish new rate structures before October 1, 2008, if certain conditions are met.” See also Op. Att’y Gen. Fla. 2002-81 (the City of Satellite Beach, which adopted a local business tax prior to October 1, 1995, pursuant to § 205.0535, was not statutorily authorized to create new classifications in a subsequent biennial review).

[6] Alsop v. Pierce, 19 So. 2d 799, 805-06 (Fla. 1944). See also Sun Coast Int’l Inc. v. Dep’t of Bus. Reg., 596 So. 2d 1118, 1121 (Fla. 1st DCA 1992).

[7] Section 205.0535(5) consists of language the Legislature added in Ch. 2007-97, § 2, and 2014-38, § 7, Laws of Fla.

[8] See also Op. Att’y Gen. Fla. 2002-25.

[9] Black’s Law Dictionary (10th ed. 2014). In City of Tallahassee v. Mann, 411 So. 2d 162, 163 (Fla. 1981), the Florida Supreme Court discussed the distinction between “rate” and “rate structure” when determining the jurisdiction of the Public Service Commission. Section 366.04(1), Fla. Stat., authorizes the Commission “to regulate and supervise each public utility with respect to its rates and service[,]” but does not give the Commission the power to change a utility’s rate structure. (Emphasis added.) The Court stated that “rate” refers to “the dollar amount charged for a particular service or an established amount of consumption[,] ” and “rate structure” to “the classification system used in justifying different rates.” See also Polk County v. Fla. Public Serv. Comm’n, 460 So. 2d 370, 372 (Fla. 1984). This distinction appears to correspond to the Legislature’s use of the terms “rate” and “rate structure” in subsections 205.0535(1) and (5), respectively.

[10] Section 205.022(3), Fla. Stat. (2018), defines “classification” as “the method by which a business or group of businesses is identified by size or type, or both.”