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Los Angeles City Business License Tax Useful Information
Avoid Penalties - Remember to file and pay on time
The deadline to file the Los Angeles City Business Tax return is the last day of February, unless that day falls on weekend or holiday. If a return is filed after the deadline, the City will automatically impose a delinquent penalty and interest. If the original return is filed late and the Office of Finance subsequently issues an audit assessment, penalties will be automatically applied to the assessment. It is critical that returns be filed on time. Keep in mind that your options for requesting a successful penalty waiver are often very limited.
Professions and Occupations Tax Rate Reduction
The Los Angeles City Council granted a rate reduction for the top business tax classification. The lowering of the business tax rate for the L049 fund/class, which includes Professions and Occupations, will be phased in over three annual tax periods which began on January 1, 2016 is as follows:
  • January 1, 2016 reduced from $5.07 for each $1,000 of gross receipts or fractional part, to $4.75 for each $1,000 of gross receipts or fractional part.
  • January 1, 2017 reduced from $4.75 for each $1,000 of gross receipts or fractional part, to $4.50 for each $1,000 of gross receipts or fractional part.
  • Tax years beginning after December 31, 2017 the tax rate will be $4.25 for each $1,000 of gross receipts or fractional part
More Audits and 6 year Statute of Limitations
The City has been steadily increasing its audit staff over the past few years. As a result, we are seeing more audits, including audits of smaller businesses.

In October 2010, the City Council amended the tax code to allow for the statute of limitations to be extended up to six years on tax audits if the taxpayer’s tax is determined to be under reported by 25% or more in the years being audited. The application extended statute on audits involving Section 21.49 (Professions and Occupations) can result in a substantial tax assessment.
The City offers several types of business tax exemptions including ones for Small Business and Creative Artists. All of these exemptions require that a business initially register with the City and file its annual business tax returns in a timely manner. If these basic requirements are not met, a business will not be eligible for an exemption, even if it meets the specific qualifications for the particular exemption.
The Gig Economy and 1099s
With the success of companies such as Uber, Lyft, and Postmates along with entertainment industry positions on the rise, so is the number of 1099s being issued. In addition to the Federal and State Income tax issues, there are also local business tax issues. As an independent contractor, individuals receiving 1099s are required to file Los Angeles Business License tax returns. It is possible that the small business exemption would apply, however, in order to obtain this exemption, a timely return must be filed. The City of Los Angeles and other cities use an information sharing system with the FTB, so it is likely that a non-filer will receive a notice in the mail. Please note that independent contractors may be responsible for local business taxes in other cities as well.
Transient Occupancy Tax (TOT)
Occupancy Tax is generally imposed on the guest of a residence or hotel, charged on top of the cost of their stay. The obligation to remit the taxes to the government usually falls on the host. With services such AirBNB and VRBO, the hosts are generally responsible for collecting the TOT tax appropriately and paying this tax timely. In some locations, Airbnb collects occupancy tax from guests and sends it to the tax authority on hosts’ behalf, with no action needed from the host, however, we understand that this is not currently being done in Los Angeles and other surrounding jurisdictions. Hosts should be aware of their obligation as the rate in Los Angeles is 14%.
Sales and Use Tax Audit Assistance
Please also note that our tax team also has former sales tax auditors on staff who can assist you with any sales tax audits or questions that you may have. We have recently assisted several companies and their CPAs in handling complex sales tax audits.
Help is Here When You Need It
We realize that you can handle most business tax matters and audits, but there may times when you need additional support and expertise. Our team of attorneys as well as the City’s former Tax Division Chief are there to help in those instances.
Amico + Associates 4444 Riverside Dr. #203, Burbank, Ca 91505   747-477-1025   fax 818.301.2074