Penticton to increase electrical rates for home business?

[fluffy]

I'd not heard of the 100 square foot rule. Perhaps it was used as an example for calculations? Bear in mind, if you're running a kiln or a welder in that 100 square feet, that's a whole different kettle of fish than keeping your Mary Kay in that 100 square feet.

The last time I looked into it, admittedly years ago, a home based business could occupy no more than one hundred square feet no matter what the overall size of the residence.

[Jhunter199]

How much you can deduct depends on how much of your house your home office occupies. If the home office occupies a tenth of the square footage of the total home area (excluding hallways, bathrooms and kitchens), then a tenth of the home's expenses can be deducted. (In Quebec, only 50 per cent of eligible home maintenance expenses can be deducted). Also the home office must be the "principal" place of business. That means more than 50 per cent of the time.

[rustled]

twobits, do you know what the business rate is, or what they are currently? I've spent a bit of time looking for a chart of rate classes in Penticton, but nothing says "business" or "industry" so I'm not sure I'm looking at the right thing, and figured you might already have the answer.

You can find it here under appendix 7....

http://www.penticton.ca/assets/City~Hal ... 014-07.pdf

It takes some reading to understand but what can be quickly be determined is small business pays more for power until you consume 10,000 kilowatts of power per month. Then you start to get a volume discount. All power consumed before that huge consumption amount is about 2 cents per kw higher and the rate only drops after that threshold.......not on the total. So to be fair, an extremely large user like a foundry would get a cheaper rate for electricty, 98% of Penticton businesses pay about 15% higher rates for the same energy used to just turn the damn lights on than a household does. Why? Cuz they can afford it cuz they are making a fortune trying to exist and not be the next vacant space up for rent?

Thanks. That's what I'd found, too, and I was trying to figure out which category applies to most businesses, and wondered if that's "Rate Code 30 - General - Secondary metered and customer owned Transformation". That rate is the second highest at 0.1429 for the first 10,000 kwh per billing, lower than the "residential special rate" of $0.1474, which seems rather odd.

(I'm not sure what any of this means. I'd have thought "Rate Code 35 - General - Primary metered and customer owned Transformation" would be the one that applied to most businesses, but it's even lower than RC20 at $0.1408 per kwh. I'm quite out of my depth with these definitions.)

While a lot of things do cost more for businesses (insurance, etc.) it does seem counter-intuitive to charge businesses more for an item where the cost of delivery should be built into the "per unit" price. On the other hand, making it more expensive to live in Penticton by hiking residential rates to match business seems counter-intuitive, too. I quite agree we want Penticton to attract more better-paying jobs, and an attractive electrical rate could help offset the less attractive costs associated with setting up shop in the Okanagan.

fluffy, unless I'm missing something, Penticton's home businesses actually pay more than our storefronts for the electricity their business uses, and they also pay the highest possible rate on their entire household use. I wonder what the rationale for this is?

[fluffy]

How much you can deduct depends on how much of your house your home office occupies.

Correct. It's based on the percentage of your residence that the home business occupies, but the City of Penticton caps the size at 100 square feet. You can claim a percentage of utilities, insurance, internet, even mortgage interest as business expenses.

[fluffy]

I wonder what the rationale for this is?

Of course the "rationale" is to increase municipal revenue at the expense of home based businesses, although I think you'd have trouble finding anyone at City Hall who would actually say that. They soothe their consciences by telling themselves that the savings a home business realizes from not supporting a standalone shop or storefront more than makes up for the small expense of higher electrical rates, which is not entirely inaccurate. It is just a loosely veiled tax in my mind, but one I have difficulty arguing against for reasons I have stated a few times already.

[rustled]

I wonder what the rationale for this is?

Of course the "rationale" is to increase municipal revenue at the expense of home based businesses, although I think you'd have trouble finding anyone at City Hall who would actually say that. They soothe their consciences by telling themselves that the savings a home business realizes from not supporting a standalone shop or storefront more than makes up for the small expense of higher electrical rates, which is not entirely inaccurate. It is just a loosely veiled tax in my mind, but one I have difficulty arguing against for reasons I have stated a few times already.

If the cost to the businesses is as minimal as you suggest, it may be the revenue collected won't offset the various costs of driving home-based businesses underground and discouraging start-ups.

[rustled]

How much you can deduct depends on how much of your house your home office occupies.

Correct. It's based on the percentage of your residence that the home business occupies, but the City of Penticton caps the size at 100 square feet. You can claim a percentage of utilities, insurance, internet, even mortgage interest as business expenses.

I was curious about this, so I looked. Yes, there is a restriction. Currently:

7.3.9 The total area of a minor home occupation shall not exceed 25% of the floor area of the dwelling up to a maximum area of 20 m².

7.4.2 A major home occupation shall not exceed 25% of the floor area of the dwelling unit, and in no case shall the combined area of the residence used for the business and an accessory building used for the business exceed 50 m².

so it maxes out at about 215 square feet and 538 square feet, depending on the size of your house.
http://www.penticton.ca/assets/City~Hal ... 0Bylaw.pdf

(Vacation rentals are a different use.)

[pentona]

I know of a lot of home-based businesses in Penticton who are not bothering to take out business licenses. Anyone who denies their existence has their head buried in the sand. The proposed increase in rates will only drive more of them underground.

It would make more sense for the city to open their eyes and get tough on those who do NOT take out businesses licenses and make them pay up or shut them down, period. That would level the playing field moreso and bring some extra funds into the city coffers which is what's behind the increase in rates to begin with.

[fluffy]

I was curious about this, so I looked. Yes, there is a restriction. Currently:

7.3.9 The total area of a minor home occupation shall not exceed 25% of the floor area of the dwelling up to a maximum area of 20 m².

7.4.2 A major home occupation shall not exceed 25% of the floor area of the dwelling unit, and in no case shall the combined area of the residence used for the business and an accessory building used for the business exceed 50 m².

so it maxes out at about 215 square feet and 538 square feet, depending on the size of your house.
http://www.penticton.ca/assets/City~Hal ... 0Bylaw.pdf

Thanks for that, my numbers were grossly out of date. Obviously home businesses are becoming more popular, hence the cash grab.

[fluffy]

If the cost to the businesses is as minimal as you suggest, it may be the revenue collected won't offset the various costs of driving home-based businesses underground and discouraging start-ups.

I wonder how real a threat the "underground" thing really is. I mean, we're talking about less than twenty bucks a month here. On the other hand, how many home businesses do you think are already operating without a business license? It's not like the city actually takes steps to enforce business licensing. I know people who operated shops and storefronts without a business license for years and nobody said boo, I'd be willing to bet that the vast majority of home based businesses already operate unlicensed. Licensing doesn't offer any direct benefit to a business, does it?

[JagXKR]

Would not licensing be a benefit for the city as it is a way to control the types, locations and size of businesses located in residences? Would that not be a benefit for the citizens as a whole? I think so.
Going one step further would it not be a benefit for a business that competes with others by making a level playing field? Or at least somewhat level? I think so.

The tax deduction of "percent of home" seems to be a generic deduction as opposed to a specific one. If a business has a specific expense that they can deduct then they deduct it. The increase in cost of electricity is a specific result of the business and should be able to be deducted.

I am wondering if this deduction thing is similar to a company I worked for many years ago. When moving I could deduct a lump sum or an itemized amount for incidentals. Don't remember the specifics but say it was $500. You had the choice of just declaring the $500 or submitting receipts for all the expenses. The company chose the rate based on averages and raised it a bit. Most just used the flat rate/lump sum. Is the deduction of taxes for home business like that? Most just use the percentage of floor space for electrical deduction? I would think that an increase in any expense due to the business would be tax deductible.

A good tax accountant could answer all these questions, or a phone call to Revenue Canada at 1-800-959-5525.

https://www.canada.ca/en/revenue-agency ... dutilities

https://www.canada.ca/en/revenue-agency ... enses.html

[pentona]

I wonder how real a threat the "underground" thing really is. I mean, we're talking about less than twenty bucks a month here. On the other hand, how many home businesses do you think are already operating without a business license? It's not like the city actually takes steps to enforce business licensing. I know people who operated shops and storefronts without a business license for years and nobody said boo, I'd be willing to bet that the vast majority of home based businesses already operate unlicensed. Licensing doesn't offer any direct benefit to a business, does it?

If the above is indeed true then the city needs to crack down asap and the revenue from ensuring that folks do take out licenses would surely equal or exceed anything gained from increasing electrical rates to home-based businesses.

Also cracking down on Vacation Rentals who are underground could really help the city coffers. This from the city of Penticton website:

City of Penticton Bylaw Enforcement Officers will be actively enforcing the vacation rental regulations. Property owners who operate vacation rentals without having a business licence or are operating against the regulations will be subject to bylaw enforcement and liable for fines of up to $10,000.00. This includes the rental of units to more than the maximum number of occupants or for the disturbance of neighbouring residents.

[rustled]

If the cost to the businesses is as minimal as you suggest, it may be the revenue collected won't offset the various costs of driving home-based businesses underground and discouraging start-ups.

I wonder how real a threat the "underground" thing really is. I mean, we're talking about less than twenty bucks a month here. On the other hand, how many home businesses do you think are already operating without a business license? It's not like the city actually takes steps to enforce business licensing. I know people who operated shops and storefronts without a business license for years and nobody said boo, I'd be willing to bet that the vast majority of home based businesses already operate unlicensed. Licensing doesn't offer any direct benefit to a business, does it?

I'd say it's a pretty big likelihood. A small business doesn't "get" anything for their $165 other than knowing they've done the right thing, so someone thinking of starting a small sideline to supplement the family income is already looking at whether or not there's actually a point to spending that. Someone suggested being changed from residential to residential-special rate would add about $15 per month to an electric bill, so that's more than doubles the price of the business licence: $345 to the city, for being honest.

In my case, an older and less efficient house with only electricity, the extra electrical cost would be $450 a year (based on consumption for the past 10 years or so, when I no longer had kids to feed and clothe at home). So if I was thinking I might start something up and wondering if it would cost more than it's worth, I'm looking at $165 plus $450 = $615 to the city, whether I make a profit or not.

If people with small sidelines generating little income stop taking out business licences, we don't just lose the $165 to $345 per annum. We also lose the benefit of tracking what's happening in the city. If people who aren't prepared to break the rules decide it's too high a cost during start-up to sacrifice time from their family, we lose vibrancy.

How many small (and not-so-small) businesses currently operate without a licence? You may be right in thinking it's the vast majority. I'd think the city would want to have some idea of this before they pursued a policy that will probably make it a bigger problem.

I'm not sure we want to see a major crack-down. The city won't improve its image by "nailing" grandparents selling Avon or the products of their wood-working, or stay-at-home parents and part-time employees making a few bucks doing birthday cakes or mowing lawns on the side.

[fluffy]

The tax deduction of "percent of home" seems to be a generic deduction as opposed to a specific one. If a business has a specific expense that they can deduct then they deduct it. The increase in cost of electricity is a specific result of the business and should be able to be deducted.

The ten percent rule is a formula used by Revenue Canada. If the city were to frame the electrical increase in such a way that it would be directly attributable to the business then yes, you'd think it would be deductible in its entirety, but as long as it just appears as an electric bill I suspect you'd have a tough time getting it by the feds.

If the above is indeed true then the city needs to crack down asap and the revenue from ensuring that folks do take out licenses would surely equal or exceed anything gained from increasing electrical rates to home-based businesses.

I agree, but that would fall under "easier said than done".

[pentona]

Fluffy, its not that tough to figure out who is breaking the rules by not taking out business licenses. If the average joe knows of many, the City and Bylaw could as well, if they wanted to.

Presently the Bylaw dept is complaint driven. In other words they could act under the bylaws but choose to keep the blinders on until a member of the public informs them of any violations. Sad that we pay these people good money when they could be doing a lot more to earn their keep and fill the city coffers. Not saying that they should be as tough as the impark type folks are; but take the blinders off and wake up is all I am suggesting.