Free Market

Utah Cities Flout State Law to Collect Money from Home-Based Business Owners


For four years, we worked with Representative-now-Senator Anderegg on legislation that would exempt home-based business owners from having to pay money to their city or county for legal permission to work in their own home. Finally, earlier this year, the legislature agreed to compromise language that achieved our goal.

That language says that if the impact of your home-based business does not “materially exceed” the impact of the residential use of your home, the city must exempt you from having to pay them money.

This makes sense, of course; working on a computer in your basement, or selling essential oils, or sewing, or designing clothes, has effectively zero impact on your neighbors.

But some cities are continuing the fight they’ve been waging for years. And it all comes down to the money. (Throughout Utah, cities have been taking over $1 million from home-based business owners for these unnecessary fees.)

For example, the Centerfield city council met last week to discuss how their city was going to circumvent the law by requiring an “administrative fee” instead of a license fee, thereby enabling them to “keep [their] revenue up.”

Staff and council members chuckle amongst themselves in the brief audio clip. One resident chimes in to sarcastically ask if they were making the fee a “mandatory donation,” and city officials respond affirmatively. Listen to the audio for yourself:

They’re not the only city resisting the change and fighting to keep the revenue. Several cities are interpreting the law so as to allow them to require a fee if a home-based business receives customers. In other words, if one person a day comes to your home for business purposes, cities want your money.

A rational reading of the state law demonstrates how incorrect this is. One person a day is not an impact on neighbors that “materially exceeds” the residential use, since it’s quite common for friends, neighbors, church members, and other people to visit a home. Cities using this argument are in violation of both the letter and spirit of the state law.

But there are more arguments. For example, some cities argue that deliveries to the home disqualify a home-based business owner from receiving the exemption. One such offender is Syracuse, which indicated that they were taking direction from the Utah Business License Association. (Yes, such an organization exists… because government.)

The licensing official in Syracuse explained to our office that the city’s argument could be that the “impact” has to be measured not against an individual resident, but the neighborhood. So I might say that I get deliveries twice a day from Amazon Prime orders, and so a delivery once in a while for my business does not “materially exceed” that. But the city employee suggested that this argument would only work if it could be proven that those heavy deliveries were a “standard for the whole neighborhood”—in other words, the exemption would only apply if everybody gets packages daily as well.

Again, this clearly violates the letter and spirit of the law. It’s a transparent and desperate attempt to continue to extract money from residents—an especially problematic situation given that no services are provided by the city in exchange for the fee.

Well, that’s not entirely true. As you heard in the Centerfield city council audio above, officials said the $50 fee they were still imposing was to “keep track of all these people that are doing business.” But why does the city need to track a mommy blogger or a piano teacher?

They don’t. As evidence of that, we point you to Farmington and South Ogden. Unlike other cities that have been wiggling around the state law to keep the money coming in, these ones completely repealed their home-based business license. Farmington’s website now says “You do not need a license from Farmington City to operate a business out of your home!” South Ogden sent a letter to home-based business license holders which read, in part, “This letter is notice that your city license application will now be closed. Good luck with your future success.”

We applaud these cities for disengaging on this issue and leaving small home-based businesses alone. Because they are in the overwhelming minority, it will be necessary to petition the legislature to amend the law and clarify the intent of the existing law in more explicit detail.

More on that as the next legislative session gets underway in January…

  • Prairiemom3

    I tell you what. There better be a recall petition going around Centerfield this weekend.

    • I can’t wait to see or hear about the fallout in that tiny town. Imagine if every resident knew that their elected councilmembers were laughing and joking over finding ways around a state law designed to protect citizens from unnecessary taxes and fees? Tell that to the piano teacher or seamstress or etsy artist. Because some good ‘ol boys want to keep city revenue up, they find a not-so creative, and likely illegal, way to keep extorting you? I wonder how funny this small town would find their loss in a lawsuit where they would have to pay attorney’s fees? That would be pretty funny. Pretty sad actually. A town like that would have to literally lay off critical city staff if they lost a simple lawsuit. They are treading on dangerous ground both financially and politically.

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