The following words and phrases whenever used in this article and in Article 1.5 shall be construed as defined in this section, unless from the context a different meaning is intended or unless a different meaning is specifically defined and more particularly directed to the use of such words or phrases:
(a) "GROSS RECEIPTS." (Amended by Ord. No. 176,326, Eff. 1/16/05, Oper. 1/1/05.) Except as otherwise specifically provided, the term "gross receipts" as used in this article shall mean the gross receipts of the tax year and shall be calculated on either a cash or accrual basis in accordance with Internal Revenue Service guidelines. Gross Receipts is defined as follows:
The total amount charged or received for all sales and commissions for the performance of any act, service or employment of whatever nature it may be, whether such service, act or employment is done as part of or in connection with the sale of goods, wares, merchandise or not, for which a charge is made or credit allowed, including all receipts, cash, credits and property of any kind or nature, any amount for which credit is allowed by the seller to the purchaser without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, interest paid or payable, losses or any other expense whatsoever. Gross receipts shall also include the amount of any federal manufacturers or importers excise tax included in the price of the property sold, even though the manufacturer or importer is also the retailer thereof and whether or not the amount of such tax is stated as a separate charge.
The term "GROSS RECEIPTS" as used in this article shall not include the following:
(1) Cash discounts allowed or taken on sales;
(2) Any part of the sales price of any property previously sold and returned by the purchaser to the seller which is refunded by the seller by way of cash or credit allowances given or taken as part payment on any property so accepted for resale;
(3) The amount of any federal tax imposed on or with respect to retail sales whether imposed upon the retailer or upon the consumer and regardless of whether or not the amount of federal tax is stated to customers as a separate charge, or any California state, City, or city and county sales or use tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser;
(4) The amount derived from a business activity sold or otherwise transferred to another person during the preceding calendar year;
(5) Any amount received from or charged to any person which is a related entity to the taxpayer. A person is a related entity to a taxpayer if 80% or more of the ownership interests in both value and voting power of said person and the taxpayer are held, directly or indirectly, by the same person or persons. Notwithstanding the foregoing, any amount received from or charged to any person which is a related entity to a taxpayer shall be included in "gross receipts" when said amount is compensation for activities, including but not limited to, selling, renting and service performed by the taxpayer for any person which is not a related entity to the taxpayer; and
(6) Any uncollectible amount apportioned to the City of Los Angeles which has been written off as a "bad debt" in compliance with Internal Revenue Service guidelines. Any portion of bad debt subsequently recovered by a taxpayer shall constitute taxable "gross receipts" in the year that it is recovered. The provisions of this exclusion shall apply to any person paying a tax under the provisions of this article.
The term "Tax Year" as used in this article shall mean the calender year unless there is a specific election to use the business's fiscal year. After an election to use the fiscal year is made, a business may not change its tax measure year from that fiscal year, unless it changes its fiscal year or receives a waiver from the Director of Finance. The measure of tax for a business electing to use its fiscal year shall be attributable to the 12 month period ending on the last day of its fiscal year, and shall be for the fiscal year ending in the calendar year that would otherwise be the measuring year.
(b) “BUSINESS TAX” shall mean the privilege tax imposed upon persons engaged in the businesses or occupations described in Sections 21.50 to 21.198, inclusive, of this article for the privilege of engaging in such businesses or occupations within the City of Los Angeles.
“SALES TAX” shall mean that tax imposed by Section 21.199 of Article 1, Chapter 2 of this Code.
“USE TAX” shall mean that tax imposed by Article 1.5 of Chapter 2 of this Code.
(c) “NEWLY ESTABLISHED BUSINESS” shall mean a business which was not engaged in during the immediately preceding business tax period specified for that kind of business. A business to which a valid existing registration certificate is transferred pursuant to the provisions of Sec. 21.11 is not a newly established business, and shall be taxed as if the ownership had not changed.
The following shall not be considered newly established businesses:
(1) The business engaged in from a new location whether within or outside the City when the business conducted and taxed at the location used during the preceding business tax period was discontinued at the same time or prior to commencement of business at the new location;
(2) The business engaged in during the current business tax period is the same kind as that engaged in during the immediately preceding period, but not at the close thereof;
(3) The business to be engaged in during the current tax period though not in fact the same kind of business, is taxed under the same section as the business engaged in during, but not necessarily throughout the immediate preceding tax period.
Provided that the Director of Finance may, on written application by the taxpayer, and after considering all circumstances, find that a business described in this paragraph is in fact new and not a continuation of a business engaged in during the immediately preceding business tax period.
(d) “PERSON” shall mean any individual, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, partnership, joint venture, club, company, joint stock company, business trust, domestic or foreign corporation, association, syndicate, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit or otherwise. (Amended by Ord. No. 174, 272, Eff. 11/26/01.)
(e) “REGISTRATION CERTIFICATE” shall mean Business Tax Registration Certificate.
(f) “STREET” shall include all streets, avenues, highways, alleys, courts, lanes, places, squares, curbing, sidewalks or other public ways in this City which have been or may hereafter be dedicated as such and open to public use.
(g) “SALE,” “SELL” shall be deemed to include and refer to: The making of any transfer of title, in any manner or by any means whatsoever, to tangible personal property for a price, and the serving, supplying or furnishing, for a price, of any tangible personal property fabricated or made at the special order of consumers who do or who do not furnish directly or indirectly the specifications therefor. A transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price shall likewise be deemed a sale. The foregoing definitions shall not be deemed to exclude any transaction which is or which, in effect, results in a sale within the contemplation of law.
(h) “BUSINESS” shall mean any activity, enterprise, profession, trade or undertaking of any nature conducted or engaged in, or ordinarily conducted or engaged in, with the object of gain, benefit or advantage, whether direct or indirect, to the taxpayer or to another or others. The term shall include operations of subsidiary or independent entities conducted for the benefit of others and at no profit to themselves, nonprofit businesses and trade associations. A person shall not be deemed to be engaged in business solely by reason of receipt of dividend or interest income from passive investments. (Amended by Ord. No. 174, 272, Eff. 11/26/01.)
(i) “ENGAGED IN BUSINESS” shall mean the conducting, operating, managing or carrying on of a business, whether done as owner, or by means of an officer, agent, manager, or employee. A person shall be deemed engaged in business within the City if:
(1) such person or his employee maintains a fixed place of business within the City for the benefit or partial benefit of such person, or
(2) such person or his employee owns or leases real property within the City for business purposes, or
(3) such person or his employee regularly maintains a stock of tangible personal property in the City for sale in the ordinary course of business, or
(4) such person or his employee regularly conducts solicitation of business within the City, or
(5) such person or his employee performs work or renders services in the City on a regular and continuous basis involving not less than seven working days per year for all such employees, or
(6) such person or his employee utilizes the streets within the City in connection with the operation of motor vehicles for business purposes.
The foregoing specified activities shall not be a limitation on the meaning of engaged in business. (Amended by Ord. No. 174, 272, Eff. 11/26/01.)
(j) (Added by Ord. No. 172,783, Eff. 9/30/99.) “INDEPENDENT CONTRACTOR” shall mean: any entity, other than an individual, that performs services for a principal; and any individual who performs services for a principal for a specified recompense for a specified result, under control of the principal as to the result of the work only and not as to the means by which such result is accomplished. An independent contractor receives income that should be reported to the Internal Revenue Service by the principal on IRS Form 1099, should report the income to the Internal Revenue Service on IRS Form 1040, Schedule C and may deduct the cost of the use of a home for business purposes on said Schedule C. Factors which indicate status as an independent contractor are if an individual:
(1) is not required to follow instructions on how to perform services;
(2) possesses the skills necessary to perform the task and does not need additional training;
(3) performs services that are not essential to the principal’s business or are not incorporated into the product or services sold by the principal;
(4) should be able to subcontract all or a portion of the project;
(5) can hire and supervise his or her own employees, but should not supervise, or be supervised by, the principal’s employees;
(6) generally works on one project and moves on, acquiring additional projects when and if he or she is available;
(7) establishes his or her hours of work, working as necessary to accomplish the end result;
(8) usually has the right to work simultaneously for the principal and others, as long as the end result is achieved;
(9) should be able to choose where to perform some, if not all, of the services;
(10) can control the manner and method of performing the services;
(11) is responsible only for the end result, and is not required to submit interim reports;
(12) generally is paid a flat rate for the completion of the project;
(13) is expected to assume the burden of business expenses;
(14) should have the tools and equipment necessary to perform the services independently;
(15) makes as an investment in tools, business equipment, publications and supplies appropriate for his or her business;
(16) accepts both the benefits and risks of a business transaction, in that he or she has the opportunity to profit from the project price and risks a loss if the end result is unacceptable or costs exceed the project price;
(17) can and does work for multiple firms simultaneously;
(18) offers his or her services to the general public;
(19) can be terminated only according to the terms of an agreement, and could recover damages for breach of contract if termination is outside the scope of the agreement; and
(20) has as an obligation to complete the work under contract.
(k) (Added by Ord. No. 172,783, Eff. 9/30/99.) “EMPLOYEE” shall mean any individual who performs services for a principal in a capacity other than as an independent contractor. An employee receives income that should be reported to the Internal Revenue Service by the principal on IRS Form W2, should not report the income to the Internal Revenue Service on IRS Form 1040, Schedule C and may not deduct the cost of the use of a home for business purposes on said Schedule C. Factors which indicate status as an employee are if an individual:
(1) can receive instructions concerning the means and methods of achieving a result;
(2) may receive training from the principal;
(3) provides the services essential to bringing the principal’s product or services to market;
(4) cannot delegate his or her responsibilities;
(5) deals with subcontractors and employees only within the framework of the principal’s directions or policies;
(6) has a continuing relationship with the principal;
(7) must work the hours that are dictated by the principal;
(8) usually must make a time commitment to the principal;
(9) must perform services at the location chosen by the principal;
(10) is subject to the principal’s control over the sequence of tasks;
(11) can be required to submit interim reports;
(12) is usually paid on an hourly or salary basis;
(13) is usually reimbursed for business expenses;
(14) is provided needed tools by the principal;
(15) is not required to invest in the principal’s business;
(16) is paid for his or her time and bears no risk of wage loss if the principal’s product is unprofitable;
(17) can be precluded from some alternative jobs;
(18) does not perform services directly for the public, but only for the principal;
(19) can be discharged at will; and
(20) normally may terminate his or her relationship with the principal without incurring liability.
(l) (Added by Ord. No. 172,820, Eff. 10/28/99, Oper. 1/1/01.) “INDUSTRY CODE” shall mean the industrial classification number assigned to an industry in the North American Industry Classification System (NAICS) by the Executive Office of the President, Office of Management and Budget.