Introduction to Los Angeles City Business Tax

Every city, municipality, and township has the right to regulate commerce within its jurisdiction. This includes requiring businesses to obtain permission to do business from that authority. Most cities require registration and an annual fee. Sometimes that fee is one-time only. Usually, it is an annual fee that has one to three levels based on the size of the business. However, Los Angeles is unusual in that it has an annual business license tax that, for most businesses, is based on gross revenue.

Los Angeles Municipal Code and Tax Calculation

Unlike most cities in California, Los Angeles has its own municipal code (most cities are “General Laws” cities). Business taxes are discussed in Chapter II of the code. Most businesses are taxed in proportion to their gross revenue from the preceding calendar year. The tax base is determined by rounding up the gross revenues to the nearest $1,000 and multiplying that number by the tax rate.

Tax Rates by Business Activity

There are six different tax rates for different types of activity, but the main rate is $4.25 per $1,000 of revenue for “Professions and Occupations”. Certain specified activities have lower tax rates, e.g., wholesale sales pay $1.05 per $1,000 in revenue, while retail sales pay $1.32 per $1,000 in revenue.

Special Cases and Exceptions

Several activities fall outside of this scheme. For example, cannabis sales are taxed at $100 per $1,000 of revenue. Amusement parks are taxed at a fixed rate per quarter. Dance halls are taxed quarterly based on their size, and film and television producers are taxed on their production costs rather than their revenue.

Small-Business Exemption

There is a small-business exemption for businesses that file on time. A business that has less than $100,000 will be exempt from paying tax, but it must still file annually.

Filing and Payment Procedures

The business tax is due at the end of February. The most common way to file is online at the city’s Office of Finance website. However, the online filing software is not good at dealing with businesses that have more than one class of activity. Those businesses might prefer paper filing using the Los Angeles Office of Finance Form ID–64. Businesses that have 80% or more of their activities under a single activity class may elect to report all their activities using that class.

Self-Reporting and Enforcement

The Los Angeles business tax is self-reporting. This means that it’s the business’s obligation to report its existence and its revenue to the city. However, if the city notices a business in its jurisdiction, it will send out a notice. If that notice is ignored, the city will estimate the business’s revenue and calculate penalties and interest accordingly. If the business continues to ignore the city, the office of finance will refer the case to the city attorney, who will then obtain a judgment against the business.

However, up until that judgment is obtained, the city is willing to work with businesses to settle the issue. At any time, the business can contact the city and provide the information it requires. The city will then calculate tax and interest, and if the business pays promptly, the city will waive penalties, provided that the business is acting in good faith.

Registration and Resources

Rather than risk letting things get out of hand, the smart thing to do is to register your business as soon as it begins operations in Los Angeles, or as soon as possible if it has already started.

• New business registration
• Annual business taxes
• Paper Filers

Staying proactive helps you avoid penalties and keeps your business in good standing with the city. Register your business, file your annual tax return, or download the necessary forms today by visiting the Los Angeles Office of Finance website. Connect with our team if you need additional support or have questions about your unique situation.