New Business License Tax Structure Effective July 1, 2025

For new businesses, NAICS was designed and documented in such a way to allow business establishments to self-code. You can use this Search Tool to find any NAICS code quickly and easily. Enter a keyword that describes your kind of business. A list of primary business activities containing that keyword and the corresponding NAICS codes will appear. Choose the one that most closely corresponds to your primary business activity, or refine your search to obtain other choices.

For existing businesses, you or your accountant chose a NAICS code the first time you filed business taxes. This code is on your Schedule C, Box B, or Form 1065, Box C. This is a good time to verify that this is the right NAICS code for your business.

Per Municipal Code Sec 32.102, an employee is any person engaged in the operation or conduct of any business including an owner, any member of an owner's family, partner, agent, manager, solicitor and any and all other persons employed or working in or associated with the business whether or not any salary or other compensation or remuneration is paid for such work.

The definition does not include people employed on a seasonal or periodic basis for less than one month or on a part-time basis for two months or less.

If the business uses a freelancer or other contractor who is not on payroll and that person comes in to Redwood City to work, that’s considered doing business in Redwood City. They should have their own business license. If they work outside of Redwood City, they do not need a business license.

You should report the average number of persons employed in your business. If the average includes a portion of an employee, round down to the nearest employee if the average is .49 or less and round up if it is .50 or more. The minimum number of employees for one of the employee-based categories is 1. Even if you do this part-time or seasonally, you will be charged the price for one employee.

Example 1: Mostly Stable

You reported to the California State Employment Development Department that you had 10 employees January through May, and 12 employees June through December. You have 11 average persons employed. See how it works (click to enlarge). 

Example 2: Seasonal Peaks

You reported to the California State Employment Development Department that you had 50 employees October through December, and 10 employees January through September. You have 20 average persons employed. See how it works (click to enlarge).

Example 3: Project-Based / Contracting Work

You are doing a project in Redwood City that you expect will take 4 months and 20 employees each month. You have 7 average persons employed. See how it works (click to enlarge).

Alternate Method

Alternately, you may calculate the average number of persons employed daily by the applicant for one year, determined by ascertaining the total number of hours of service performed in the City by all such employees during the previous year and dividing the total number of hours of service.

If you have 3 full-time employees, 1 half-time, and 1 seasonal employee who works for 4 months and 1 part-time intern who works for 2 months, you have 4 average persons employed. See how it works (click to enlarge).

Yes. Businesses with more than 10 employees are required to submit the DE9C form for the previous quarter. If the business operates multiple locations throughout California and the DE9C form would not be appropriate for verifying number of employees in Redwood City, the business may additionally or alternately submit either an employee report from the worksite in Redwood City or an attestation from the business explaining why the DE9C number of employees exceeds the number of employees reported in Redwood City, and affirming that the number of reported employees is true and correct (Municipal Code 32.120-32.121).

If the hybrid/remote employee works in the Redwood City office an average of two or more hours per week, they are considered a Redwood City employee.

Report those employees who work in Redwood City at least two hours per week. If that seems like a weird number to you, it aligns with Redwood City’s policy on who is eligible to earn at least minimum wage. If you have one person working on a project in Redwood City, but otherwise your headquarters is in Fremont, you would report 1 employee.

Non-profits are businesses, too. We ask that you get a business license so that we can track how many businesses and what types are based in Redwood City. We also want to be able to have contact information for you in case we need to share information that could affect your business, for example, about major development projects, street closures, or regulations. However, non-profits with 501(c) documentation are exempt from paying the business license tax; you would pay only the $4 state database fee.

Yes, The City may issue an exempt license if your business fits one of the exempt/exclusion categories as defined in our Business License Ordinance in sections 32.130-32.136. However, we ask that you still apply for a business license so that we can track how many businesses and what types are based in Redwood City. We also want to be able to have contact information for you in case we need to share information that could affect your business, for example, about major development projects, street closures, or regulations.

The Redwood City Municipal Code Section 32.154 states that the incremental tax is applied per employee to the type of business. Therefore, a contractor is required to report all employees under the Contractor rate; a service provider under the Services rate, and a professional service firm under the Professional Services rate.

The number of employees is the average number of persons employed, including an owner, any member of an owner's family, partner, agent, manager, solicitor and any and all other persons employed or working in or associated with the business whether or not any salary or other compensation or remuneration is paid for such work.

Yes, the City and its contractor, HdL, will conduct audits on a selection of businesses, to ensure accurate reporting (Municipal Code Section 32.122). 

Any business that manages, operates, leases, rents, or provides use of any dwelling unit, including an apartment, house, duplex, hotel, motel, mobile home park, rooming or boardinghouse, to another individual or entity for compensation is considered Rental (Residential). However, for the purpose of Business License tax, the management, operation or rental of three (3) or less residential units shall not be deemed a residential property rental (Business License Ordinance Section 32.102) and does not require a business license or payment of the business license tax.

This is a short-term rental and yes, you need a business license and you need to register to pay Transient Occupancy Tax.  

Contact Revenue Services at 650-780-7214 or revenueservices@redwoodcity.org. Revenue Services will review the business type and make the adjustment if necessary.