In an effort to address an ongoing fiscal crisis, Windsor leaders are looking at whether a new tax on local businesses would be enough to backfill the town’s budget deficit. The option comes as the town also considers placing a 1 cent sales tax — a first for Windsor — on the November ballot.
A business license tax is a levy that would be assessed on the town’s roughly 2,100 businesses. The tax would have to go to voters and would require a simple majority approval to pass.
The option gained popularity over the last month as town officials held community meetings to discuss its fiscal crisis and float potential revenue tools — namely a sales tax, which has been slow to pick up traction with some residents.
The business sales tax “is a revenue driver that needs to be considered,” Windsor resident Betsy Mallace told the Windsor Town Council during its March 4 meeting.
The town faced a $19 million shortfall in its 2025-27 two-year budget cycle: $9 million in 2025-26 and $10 million in 2026-27. The council responded by cutting $6 million in spending and another $6 million in deferred maintenance. They also used $8 million from reserves to offset the remaining shortfall.
The imbalance stems from multiple revenue dips: sales tax was down 2% last fiscal year, or $121,327; lodging tax fell by $437,750 or 14%. Property tax is the one steady revenue stream, expected to bring in just over $10.9 million, up 9% from the previous year.
At the same time, operational costs continue to climb. Police services — provided under contract by the Sonoma County Sheriff’s Office — rose $2 million, or 26%, from the previous budget cycle, driven largely by salary increases, overtime costs and administrative overhead, Town Manager Jon Davis said.
Without new, ongoing revenue, the town projects a general fund deficit of $4 million to $5 million during the 2027-29 budget cycle.
Currently, Windsor businesses pay a $71 fee for a new license and $26 per year to renew their license to operate. This flat-fee cost recovery system brings in $75,000 annually — the second lowest gross revenue from business license fees for all Sonoma County municipalities after Cloverdale.
According to Nick Walker, Windsor’s administrative services director, the town’s fee schedule has not been updated since 2012. The town expects to update those fees by July 1.
Sonoma County Business Tax Assessments and Fees
Sonoma County’s nine cities impose fees on businesses differently.
- Santa Rosa has a voter-approved tax based on gross receipts. The levy generates $10.5 million annually that goes into the city’s general fund.
- Petaluma has a tiered business license tax based on gross receipts. The city brings in about $1.2 million annually.
- Rohnert Park has a classification-based business license fee. The city brings in about $450,000 annually.
- Healdsburg has a tiered business license tax based on gross receipts. The city brings in about $388,000 annually.
- Sebastopol charges a flat fee for business categories. The city brings in about $143,000 annually.
- Cotati charges business fees based on the number of employees. The city brings in $108,000 annually.
- Windsor has a flat-fee business fee. The city brings in $75,000 annually.
- Cloverdale has a flat rate business fee. The city brings in $70,000 annually.
Tim Ricard, economic development manager, suggested creating a potential business license tax based off Santa Rosa’s, which was approved by voters in 2024. Santa Rosa’s business license tax assesses fees on the city’s businesses using a gross receipts-based system.
Ricard estimates such a tax could bring in $1.3 million for the town, but said it would not be enough to backfill the town’s budgetary needs.
“This is not a structural fix,” Ricard said.
A sales tax, he said, would bring the town closer to fiscal solvency.
Santa Rosa Business License Tax Fees
Santa Rosa’s business license tax assesses fees on the city’s businesses based on gross receipts.
- Businesses that make $100,000 or less are taxed $200;
- Businesses that make between $100,001 and $500,000 are taxed $500;
- Businesses that make $500,001 and $1 million are taxed $800;
- Businesses making more than $1 million are taxed $1,000 plus an additional rate (between $.34 and $1.68) for every $1,000, maxing out at $10,000.
Windsor is the only municipality in Sonoma County without its own sales tax. Residents currently pay 9.25% sales tax at the register — including the statewide 7.25% base tax, a share of which comes back to Windsor, and countywide voter-approved taxes that fund libraries, SMART, transit and road projects, park upgrades and open space protection, fire services, and child care and mental health programs.
A local sales tax would send a dedicated share directly to the town for the first time. Because of its general purpose, it would require only a simple majority to pass.
Staff say a 1-cent sales tax — generating one penny for every qualifying dollar spent — could bring in roughly $5.5 million annually. It also would make Windsor’s sales tax the second highest in the county — tied with Cotati, Petaluma and Sonoma — and just below Sebastopol’s 10.5%, one of the highest rates in the state.
Some residents say they would like to be given agency to choose how to fill the town’s deficit and see both options — the sale and business license levies — on the November ballot.
“I really feel like if you moved forward with the sales tax you should give voters the option of the business tax,” Mallace said.
Ricard and Walker said that while both taxes could be placed as measures on the November ballot, they were concerned doing so could lead to confusion and voter fatigue.
“Every city in Sonoma County has successfully passed a sales tax measure,” Walker said.
“But while every other city passed a school bond (last year), Windsor did not,” Mallace responded. “We need to be aware of that.”
Amie Windsor is the Community Journalism Team Lead with The Press Democrat. She can be reached at amie.windsor@pressdemocrat.com or 707-521-5218.
