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I first published this blog post in 2018, and it’s been one of our most popular each year.
I started my Los Angeles-based company in 2017. In April 2018, I got a scary letter levying a $4,000 penalty against the $28,000 I had earned in freelance income. I vowed from there that I would annually assist my fellow LA business owners and freelancers in 1) avoiding this stupidity and 2) making the case for small business policies rooted in a teeny bit of reality.
TL;DR
- If your place of business or freelance work is physically located in Los Angeles, you must register with the Office of Finance by February 28
- Even if you didn’t earn any money, you have to register
- You may owe gross receipt taxes even if you operated at a loss
- You may owe gross receipt taxes if your business is located outside Los Angeles but you did business here for at least 6 days
- Yes, the city really can slap you with a misdemeanor and a fine
While I hold out hope that the City of Los Angeles, more specifically, our esteemed city council, will get some sense and convert to an income-based taxation model, we’re still out here doing this gross receipts thing for 2022.
Not in LA? Whether you’re in Burbank or Baltimore, this might also apply to you. If you earned revenue in the City of Los Angeles over 6 or more days, your earnings activities within the city proper are subject to the gross receipts tax and business filing requirement, regardless of where your business is located.
If you don’t comply, the City is allowed to charge you with a misdemeanor and slap a $1,000 fine per instance. Before you get a heart-stopping penalty letter from the Office of Finance over the money you didn’t know you had to pay, here we go.
It’s that time of year again when the City of LA’s relic of a city tax system will jump up and bite you. The City of Los Angeles is one of a few cities that has decided 1) the gig economy needs to be taxed and 2) they don’t care if you’re profitable.
You have until February 28 to complete an online filing and revenue report. If you do not register, the City of LA can slap you with a misdemeanor and a fine. Yes, it’s a legit crime to not file for a business license.
Even if you did not get a 1099 or did a small job under $600, you still have to self-report.
With that in mind, did you earn money as a self-employed person or business in the City of Los Angeles in 2022? Then you need a Business Tax Registration Certificate. Registering will let you know how frequently you need to renew. However, if you’re retroactively filing for 2022, you’ll immediately be prompted to bring your gross receipts account to current to establish the license.
If you live in the City of Los Angeles and did ANY freelancing last year, or you set up a business that’s run from a Los Angeles address, you need to do this IMMEDIATELY.
Before you stress over how you’re going to pay the gas bill, the City has added a few tax exemptions. If you are a new business, small business with less than $100,000 in global gross receipts, or a Creative Artist individual or business, you should qualify for all or some of the tax bill to be cancelled.
If you’re not one of those categories, you’ll be assigned a tax rate per $1,000 of revenue based on your business activities.
If you’ve filed before, use the Business Tax Renewal page. If it’s your first time, start here. You will need to know:
- Your filing number or EIN / SSN used register
- Your total gross revenue for 2022
- What amount you earned while physically located in the City of LA
- How much you earned NOT in the City of LA (including Burbank, West Hollywood, Santa Monica, and the 23 other independent cities inside of LA County).
- How much you earned from “creative arts exemption” activities.
- If you’re a cannabis business, how much state excise tax you owe.
If you’ve been taken by surprise and need more time to pay, you can request installment options by calling the city or stopping by an office with the required information. If your tax and interest is current but you’ve received a penalty letter, you can request a waiver of penalty here.
The teeny bit of sparkly good news is, as long as you file on time, every year, you might qualify for up to $300,000 in tax waivers.
The bad news is, the City of LA continues to penalize all small business owners earning more than $100,000 with its gross receipts tax policies.
Once upon a time, former Mayor Garcetti asked the City Council to change to a profit-based tax assessment, which would encourage more businesses to set up within the city. No such word yet out of the Karen Bass administration, but we do have a (gasp!) city controller who is also a data-driven CPA that might be willing to make the financial case. Find your council representative and their social media handles to share your opinion. Or hop on Kenneth Mejia’s Twitch broadcast at 8 PM on Mondays.
Until then, there’s always Glendale.
