Coronavirus: Gov. Newsom announces 1-year sales tax reprieve for small businesses in California

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Friday, April 3, 2020
Coronavirus: Newsom announces sales tax reprieve for small businesses
Gov. Gavin Newsom on Thursday announced a "bridge loan" of up to $50,000 for small businesses in California amid the coronavirus outbreak.

SACRAMENTO, Calif. (KABC) -- Gov. Gavin Newsom on Thursday announced a "bridge loan" of up to $50,000 for small businesses in California amid the coronavirus outbreak, with a 12-month reprieve of state sales tax.

Newsom said the loan would not include and fines, penalties or interest as many businesses across the state have been forced to close their doors, lay off employees and scale back operations.

The governor made the announcement during a press briefing where he announced a series of actions to help California's small businesses and struggling workforce.

RELATED: What small businesses need to know about getting aid during coronavirus outbreak

In addition to the sales tax reprieve, the governor announced the Paycheck Protection Program -- which will reimburse businesses, up to $10 million, as long as businesses commit to paying employees.

Applications can be submitted here, beginning Friday, the governor said.

As the federal government prepares to launch the Paycheck Protection Program, a $349 billion loan program meant to help small businesses survive the coronavirus pandemic, critics have growing concerns that some mom-and-pop shops might get squeezed out.

The program - part of the $2 trillion relief package signed into law last week - was billed as a way to help local businesses that often form the fabric of communities retain workers and pay bills. But an expansive definition of "small business" in the law means that it will be open to much more than just Main Street shops when lenders start processing applications Friday.

Operators of name-brand hotel, restaurant and service chains and franchises with thousands of employees at locations scattered across the U.S. are eligible. Lobbyists are pushing the Small Business Administration to interpret the law generously to help sectors devastated by mandatory business closures and stay-at-home orders, possibly making the aid available to international fast food and lodging giants and allowing individual owners to get around a $10 million cap on loans.

While Congress could approve more money later on, the program as it stands is expected to run out quickly. That could mean applicants who have the financial and legal expertise of a larger organization might be able to maximize their benefits, not leaving much for smaller businesses, especially those who wait or have problems applying.

RELATED: Paycheck Protection Program: Stimulus aid for 'small business' will go to some big chains

Independent contractors and the self-employed could be especially hurt since they will not be eligible to apply until April 10 under guidance from the Treasury Department. By then, banks could be overwhelmed with applications.

Underscoring the need for help, the federal government reported Thursday that a record 10 million workers filed for unemployment in the two weeks ending March 28.

The program will give businesses low-interest loans of about 2.5 times their average monthly payroll. They will be fully or partially forgiven if businesses show that the money was used to retain or rehire employees and pay some overhead expenses through June 30.

The law specified that all food service and lodging businesses qualify as long as they do not have more than 500 employees at a single location. It also declared that thousands of franchises recognized by the SBA - like multilocation restaurants, hotels, gyms and hair salons - will qualify regardless of their revenue and ties to large corporate parents. Many nonprofits, which are normally ineligible for such aid, also qualify.

The law says the maximum loan will be $10 million. But lobbyists representing chains are asking that the cap apply to each location - rather than each owner.

The International Franchise Association argued in a letter to SBA that would allow the program "to achieve its intended outcome and have maximum impact." The letter urged the agency to confirm that franchisors it recognizes - that are the parent companies of major chains from Burger King to Marriott - qualify as well.

The agency is expected to issue additional guidance on the program Thursday.

Newsom also announced Thursday a new website, in partnership with Central Valley-based company Bitwise along with Salesforce and Linkedin, to link California workers with available jobs.

OnwardCA will match job seekers with employers during the virus outbreak.

Newsom said as of Thursday there are 70,000 available jobs on the website.

The jobs are primarily in the agriculture, logistics, transportation and grocery industries.

The goal is to get Californians off of unemployment insurance or avoid residents needing the assistance in the first place, Newsom said.

This comes as 6.6 million Americans file for unemployment benefits last week.

Newsom has said the number of COVID-19 cases in California is expected to peak in late May.

RELATED: How is coronavirus spread? Symptoms, prevention, and how to prepare for a COVID-19 outbreak

The spread of the virus statewide has, so far, been slow enough to give the state time to prepare for an expected spike in cases that could overwhelm hospitals if extreme measures aren't taken to keep most people home and away from others.

The state currently has more than 8,000 confirmed cases of coronavirus, with over 170 deaths.

Los Angeles County reported more than 500 new cases on Wednesday, a 17% hike over the previous day.

RELATED: What is quarantine? Can it stop COVID-19?

The mayor of Los Angeles urged 4 million residents to wear masks to combat the coronavirus when they walk out in public, even as state health officials shied away from requiring a coverup.

Mayor Eric Garcetti's non-binding mask recommendation followed a similar recommendation on Wednesday for residents of Riverside County, and was joined Thursday in Ventura County.

Newsom reiterated Thursday that the state was not mandating wearing masks in public, but said face covers can be beneficial in additional to following physical distancing and stay-at-home orders.

The Assoictaed Press contributed to this report.