Law Of The Land

Friend Or Foe?

Duston Jensen has had to close down homebased businesses. He seeks them out, regulates them, even taxes them (retroactively, no less). Yet Jensen, the manager of the tax and license division of Tacoma, Washington, claims to be acting as a friend to homebased businesses. "If all I did was enforce the law against those people who knew what the law was and who voluntarily complied, tax rates would go up for everyone," says Jensen. "I just want to be fair and equitable. I'm going to shoot from the hip and treat you the same, whether you're a multimillion-dollar corporation downtown or a $1,000-a-month homebased business."

In 1994, Tacoma decided to enforce its existing homebased business regulations, which allow clients to visit homebased businesses by appointment only, outlaw retail sales operations in residential neighborhoods, and restrict the storage or display of goods in yards. Any homebased business found in violation can be slapped with a citation of up to $1,000 and/or 90 days in jail, or even shut down. "Action will be taken," promises Jensen, who built a nationwide reputation among municipal tax officials for his aggressiveness.

The rub is that Tacoma residents are now required to buy an additional license simply to run a business out of their homes. Most homebased business owners pay an annual fee of $122 (which includes a $50 increase for being homebased). Although the fee may not be exorbitant, it has entrepreneurs up in arms. Some resent being singled out and taxed just for being homebased; others believe the city merely sees them as a juicy new source of revenue, considering the 4,600 homebased businesses registered in Tacoma generate more than $400,000 in annual revenue for the city. "I will agree and admit that the costs have increased," says Jensen. "But that is primarily to cover the costs of compliance efforts. It's an issue of spending time and effort, and providing staff to go out and enforce these rules and regulations. I think it's unfair to put that burden on storefronts."

When Jensen uncovers a homebased business that is not registered with the city, he taxes them, charging them back taxes for up to 10 years if they were unaware of the business tax and back to 1951 if they knowingly avoided paying the taxes.

Can Jensen feel homebased business owners' pain? "I understand these taxes may be burdensome when they're first discovered," he says. "Granted, it might be a surprise that all of a sudden the owners are faced with years of taxes, but it's something they should have looked into."

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