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,1, I. - Staff Report, September 12, lvvo Page 2 class. These businesses sell the types of weapons most generally used in violent acts, crime and when safety issues arise. San Francisco recently enacted an ordinance assessing a fee in the amount of 3% on gross receipts from the sale of all goods for retailers or wholesalers of firearms. Obviously, a similar ordinance in San Leandro effects all of the licensed dealers. A more targeted plan focuses on the public sale of concealable hand guns only. An exemption for businesses activity in hunting rifles and shotguns, government sales and wholesale contracts, and service reduces the impact to only several firms. Local Licensed Firearm Dealers All licensed firearm dealers in San Leandro were interviewed prior to the preparation of this report (see attached Est). The business impacts on these firms by the actions approved to date by the City Council were generally insignificant. All apparently can comply with the new regulations. Employee certifications in one of the large stores may create a conflict with the store policy for assignment rotations. The most vocal dissent related to claims of misguided penalties being applied to select, legal enterprises. A majority of the firms expressed a view that one business category should not be exclusively targeted for the cost of violence curbing programs. The impact of a gross receipts tax on the sale of firearms will vary significantly between the City's current dealers. One dealer in particular, Trader's Sports, would bear a majority of the business impact of a firearm -related tax. The sales volumes for all of the other local dealers remain a fraction of Trader's Sports sales. The estimated total annual sales of firearms in the City for all dealers is $6.5 million. A large portion of Trader's Sports sales of firearms is to government law enforcement agencies and to other gun dealers. The margin of gross profit on these sales is extremely low (i.e, less than 2%). A tax of up to 3% on these sales would place this business at a competitive disadvantage when Trader's Sports is responding to bid requests. There are several options concerning the imposition of a gross receipts tax on firearms that require further staff analysis and direction from the City Council. In order to develop of a gross receipts tax that is fair to existing businesses and will achieve the gun control objectives of other cities in the East Bay Public Safety Corridor Partnership, staff has identified several alternative methods of applying the firearms tax. These options include: a). A tax on all firearms sold by all dealers. Under this method of designating firearm sales subject to the tax, total estimated gross sales would be approximately $6.5 million and a 3% tax would generate $195,000. b). A tax on all firearms, excluding sales to government agencies and other dealers. Under this method of designating sales subject to the tax, total estimated gross sales would be approximately $3.8 million and a 3% tax would generate $115,000. c). A tax on over-the-counter sales of concealable handguns only. This definition of firearms subject to the tax would exclude rifles, shotguns, competitive bids to government agencies and other dealers. Concealable handguns are the most common weapons related to violence and safety concerns. Handgun control creates the most wide-ranging support in the community. Under this method of designating sales subject to the tax, total estimated gross sales would be approximately $2 million and a 3% tax would generate $60,000. i02 2