As the Business Tax Liaison and the Outreach & Business Education Coordinator in the Office of Finance I help educate our customers through inquiries received by email, and face to face interactions at presentations at seminars, expos and similar events. I assist with compliance and guiding them to find the answers they need. I'd likle to share some perspective on the basics of the City of Los Angeles business tax.
In order to operate a business in the City of Los Angeles, you must obtain a Business Tax Registration Certificate. Business Tax does not permit the City to regulate the conduct of a business, but rather serves as a revenue source to support the essential services the City provides. Additional registration with other Federal, State, or Local government entities may also be required depending on the structure or location of your business. For more information on what might be required from other local entities please click here.
Every person who engages in business within the City of Los Angeles is required to obtain the necessary Tax Registration Certificate(s) and pay the business tax or obtain an exemption. Businesses eligible to receive tax-exempt status include non-profits, charitable or religious organizations. Nonprofit, charitable or religious organizations must qualify under IRS Section 501 or State Tax Section 23701d. For other exempt entities please visit https://finance.lacity.org/other-exemptions.
Businesses may also qualify for exemptions during the renewal process. Creative artists must make less than $300,000 in total taxable and non-taxable gross receipts related to their creative activities. Registered small businesses must not exceed $100,000 in taxable and non-taxable gross receipts for all locations combined to qualify. For all cases, the renewal must be filed on time in order to qualify.
When registering for a Business Tax Registration Certificate (BTRC), it’s important to note that registered businesses will pay their first year of taxes in the second year of business when renewing the BTRC. This is called Back Tax. At the time of registration, only the minimum tax is paid with the application. Once the applicant renews the following year, the remaining tax is then paid based on the first calendar year’s gross receipts, if applicable. This applies even if the business ceases operation during the first calendar year. BTRC applications can be filed online, by email, or in person.
The amount of tax a business pays is based on the type of business activity(ies). Taxpayers will be assigned a classification(s) and generally report gross receipts to determine the amount due. There are some activities that are taxed on non-gross receipts factors. To determine your tax rate(s), click here. Businesses also have the option of reporting based on the business’s fiscal or calendar year. Deadlines on payments may be extended for up to 45 days, but taxpayers must pay an estimate of the total tax by the last day of the annual renewal deadline (February 28). Penalties will apply if the payment is less than 90% or more of the actual tax due. A 20% penalty plus interest on any unpaid balance will accrue during the extension period.