National City Just Proposed Taxing Businesses Up to 250 Times More — Here's the Vote

If you own a business in National City, California, the flat fee you've paid for your business license every year could soon be replaced with a bill based on how much money you actually bring in — and for some owners, that bill could jump by as much as 250 times what they pay today.

City staff in this San Diego County suburb of roughly 60,000 residents are pushing a plan to overhaul the business license tax as part of an effort to close a $13 million budget deficit driven by rising costs and sluggish property tax revenue. The city council held a special meeting on the proposal, and business owners showed up in force to push back.

What's Actually Changing

Right now, National City charges most businesses a flat annual fee to hold a business license, regardless of how much revenue they generate. A coffee shop with $200,000 in annual sales pays roughly the same as a logistics company doing $20 million.

The new proposal would scrap that flat-fee model in favor of a tiered, revenue-based structure — commonly called a gross receipts tax. Under this approach, the more a business earns, the more it owes for its license. The tax rate would also vary by industry, meaning a retailer and a real estate brokerage operating at the same revenue level could face very different bills.

One example that's drawn particular attention: real estate professionals. According to analysis circulated by local real estate groups, the proposed structure could tax commission income at a rate up to 250 times higher than the comparable business tax rate in the city of San Diego next door. That kind of gap has property managers, landlords, and agents warning they'll simply relocate their business licenses to neighboring cities if the plan goes through.

The proposal doesn't stop at traditional storefronts, either. It would also apply gross receipts taxation to property owners renting out homes within city limits — pulling landlords and short-term rental hosts into the same revenue-based system.

The Dollar Numbers Behind the Push

City officials say the current flat-fee system brings in only about $700,000 a year — a small fraction of what similarly sized cities collect from business taxes. The revised structure is projected to generate close to $7 million annually once fully phased in, according to city estimates, with staff eyeing close to $8 million by 2028 as the tiered rates mature.

That's roughly a tenfold increase in citywide business tax revenue. For an individual business, the actual dollar impact depends heavily on industry and revenue tier — a small independent retailer might see a modest increase, while a high-revenue service business could see its bill multiply many times over.

Why Business Owners Are Pushing Back

At the special council meeting, business owners and chamber of commerce representatives argued the city should look to spending cuts before asking local businesses to close a budget gap they didn't create. Their core complaints:

• The tiered structure penalizes growth — the more successful a business becomes, the more it pays, which owners say discourages expansion or hiring within city limits.
• Industry-specific rates create winners and losers rather than distributing the burden evenly.
• Landlords and rental property owners are being pulled into a system they've never had to account for before.
• Neighboring cities, including San Diego, could become more attractive places to hold a business license, pulling revenue and jobs out of National City entirely.

The council has already postponed at least one scheduled vote on the measure amid the pushback, a sign that the final structure — and possibly the rates themselves — could still shift before anything is finalized. Councilmembers are also weighing whether to send the question to voters as a ballot measure rather than approving it directly, which would push any actual tax increase out until a future election.

What This Means If You're Not in National City

Even if you don't operate in San Diego County, this fight is worth watching. Gross receipts taxes — where a city or state taxes total revenue instead of profit — have been gaining traction in cash-strapped municipalities across the country as an alternative to raising property taxes or cutting services. San Francisco and Sacramento have both wrestled with similar business tax overhauls in recent budget cycles. If your city is facing its own budget shortfall, a revenue-based business license tax is a realistic possibility worth tracking at your next city council meeting — before it becomes a line item on your renewal notice.

What Business Owners Should Do Now

If you operate in National City, or anywhere considering a similar overhaul, a few steps can protect you from getting blindsided:

• Check your entity structure. How your business is organized can affect how gross receipts taxes apply to you. If you haven't reviewed whether your current setup — sole proprietorship, LLC, or S corp — still makes sense, this is a good trigger to revisit it. Our LLC vs. S Corp guide breaks down the tradeoffs.
• Know your renewal cycle. Business license renewal dates vary by city, and a mid-cycle rate change can catch owners off guard. Our business license guide covers what to track.
• Model the impact on your numbers. Before any new tax structure takes effect, run your current revenue against the proposed tiers so you're not surprised by your next bill. A clean profit and loss statement makes this exercise far easier.
• Show up. Council votes on tax measures are public, and public comment periods have already shifted the timeline once in National City. If a similar proposal surfaces in your city, attending the meeting — or submitting written comment — is one of the few direct levers small business owners have.

National City's council has not set a final vote date as of this writing, but the proposal remains active and could return to the agenda with revised rates. Business owners in the city — and anywhere else watching municipal budgets tighten — should expect more of these fights before 2026 is over.

Photo by Tem Rysh on Unsplash