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(Art. 1, Ch. II, Added by Ord. No. 115,044, Eff. 1/1/60; Title Amended by Ord. No. 178,101, Eff. 1/9/07.)
Section
21.00 Definitions.
21.01 Unlawful Business Not Authorized.
21.02 Constitutional Exemptions.
21.03 Imposition of Tax.
21.03.1 Automatic Tax Rate Reduction
21.04 Due Dates.
21.05 Delinquent Dates – Interest – Penalties.
21.06 Separate Registration Certificate Required for Each Location and Each Business Tax Classification.
21.06.1 Single Primary Tax Classification Election.
21.07 Refunds of Overpayments.
21.08 Business Tax Registration Certificate – Form.
21.09 Business Tax Registration Certificates – Posting and Keeping.
21.10 Business Tax Registration Certificates – Charge for Duplication.
21.11 Business Tax Registration Certificate – Transfer.
21.12 Business Tax Registration Certificates – Suspension.
21.13 Newly Established Businesses – Computation of Business Tax.
21.14 Written Statements – When Required – Computation of the Tax.
21.15 Director of Finance – Duty to Enforce – Powers – Rules and Regulations.
21.16 Assessment – Administrative Remedy.
21.16.1 Voluntary Disclosure.
21.17 Confidential Character of Information Obtained – Disclosure Unlawful.
21.18 Delinquent Taxes – Installment Payment.
21.19 Delinquent Taxes – Suit for Recovery.
21.20 Delinquent Taxes – Debt Not Discharged by Penal Conviction.
21.21 Delinquent Taxes – Uncollectible.
21.22 Religious, Charity, Etc.; Procedure for Issuance of Tax Exempt Registration Certificates.
21.23 Effect of Repeals and Amendments.
21.25 Relief for Earthquake Interruption.
21.26 Empowerment Zone - City Business Tax Reductions, Limitations, and Exemptions.
21.27 Entertainment and Multimedia Business Tax Limitations.
21.29 Small Business Exemption.
21.30 New Business Exemption.
21.31 Settlement Bureau.
21.32 Rewards for Information.
21.33 [Tax Rates.]
21.41 Gross Receipts Fund Class 1.
21.43 Gross Receipts Fund Class 2.
21.46 Gross Receipts Fund Class 6.
21.47 Gross Receipts Fund Class 7.
21.48 Gross Receipts Fund Class 8.
21.49 Gross Receipts Fund Class 9.
21.50 Taxation of Medical Marijuana Collectives.
21.51 Taxation of Cannabis.
21.52 Taxation of Medical Cannabis.
21.53 Amusement Park.
21.55 Auctioneer.
21.62 Billiards, Etc.
21.63 Amusement Machines.
21.64 Coin-operated Phonographs and Music Machines.
21.65.1 Coin-operated Scales and Service Machines.
21.70 Bowling Alley, Skee-ball Shuffleboard, Etc.
21.74 Circuses.
21.75 Side Shows, Carnivals, Concessions.
21.83 Dance Hall.
21.85 Public Dance.
21.94 Rides.
21.108 Money Lenders.
21.109 Motion Picture, Television and Radio Producers.
21.142 Stevedores.
21.167.1 Sales of Firearms and Ammunition.
21.168.1 Out of State Sales.
21.168.2 Sale for Convenience.
21.168.3 Certain Solicitors Deemed Employees.
21.168.4 Exemption – Temporary Exhibitors at Tradeshows.
21.168.5 Certified Producers Deemed Employees.
21.169 Christmas Trees.
21.170 Christmas Tree Lot Clean-up Deposits.
21.171 Retailers of New Passenger Motor Vehicles.
21.187 Common Carrier Bus.
21.188 Contractors.
21.190.1 Exemption.
21.193 Sale of Real Property.
21.194 Transporting Persons for Hire.
21.195 Trucking – Hauling
21.196 Miscellaneous Trucking.
21.199 Sales Tax.
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 tax-payer. 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.
(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 the person’s employee maintains a fixed place of business within the City for the benefit or partial benefit of such person, or
(2) such person or the person’s employee owns or leases real property within the City for business purposes, or
(3) such person or the person’s 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 the person’s employee regularly conducts solicitation of business within the City, or
(5) such person or the person’s 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 the person’s 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) “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: (Added by Ord. No. 172,783, Eff. 9/30/99.)
(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 their 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 the individual is available;
(7) establishes their 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 their business;
(16) accepts both the benefits and risks of a business transaction, in that the individual 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 their 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) “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: (Added by Ord. No. 172,783, Eff. 9/30/99.)
(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 their 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 their 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 their relationship with the principal without incurring liability.
(l) “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. (Added by Ord. No. 172,820, Eff. 10/28/99, Oper. 1/1/01.)
No registration certificate or permit issued under the provisions of Article 1 or Article 1.5 of Chapter 2 of this Code, or the payment of any tax required under the provisions of Article 1 or Article 1.5 of Chapter 2 of this Code shall be construed as authorizing the conduct or continuance of any illegal business or of a legal business in an illegal manner.
Nothing in Article 1 or Article 1.5 of Chapter 2 of this Code shall be construed as requiring the payment of any tax for engaging in a business or the doing of an act when such payment would constitute an unlawful burden upon or an unlawful interference with interstate or foreign commerce, or which payment would be in violation of the Constitution of the United States or the Constitution of the State of California.
(a) Subject to the provisions of this Article, a business tax registration certificate must be obtained and a business tax must be paid by every person engaged in any of the businesses or occupations specified in this Article; and a business tax is hereby imposed in the amount prescribed in the applicable section. No person shall engage in any business or occupation subject to tax under the provisions of this Article without obtaining a registration certificate and paying the tax required. (Amended by Ord. No. 181,696, Eff. 6/18/11.)
(b) The business tax registration certificate required to be obtained and the tax required to be paid are hereby declared to be required pursuant to the taxing power of the City of Los Angeles solely for the purpose of obtaining revenue. Compliance with such requirements shall not be construed to be a condition precedent to engaging in any business or occupation within the City of Los Angeles where the imposition of such a condition precedent would be contrary to law.
(c) Commencing on January 1, 1981 the Director of Finance is directed not to enforce the Business Tax Ordinance against financial corporations for the tax years beginning January 1, 1981 until directed to do otherwise by the City Council by resolution. (Added by Ord. No. 154,914, Eff. 4/2/81.)
(Title and Section Amended by Ord No. 176,324, Eff. 1/16/05, Oper. 1/1/06.)
Commencing with the tax year 2006, the tax rates contained in this Article which are based upon gross receipts shall be reduced by up to 4% per year. The maximum total rate reduction shall be 15% from the rates imposed as of December 31, 2005. The yearly tax rate reduction shall be calculated by the Director of Finance on a percentage basis rounded to the nearest one-tenth percent (1/10%) from the net increase in business tax revenue above a baseline. Net business tax revenue shall be the amount credited as Business Tax in the Statement of Receipts published in the annual Controller’s Preliminary Financial Report. The baseline shall be the revenue forecast for business tax receipts prepared in conjunction with the 2004-2005 City budget set forth as follows:
Fiscal Year Revenue Forecast
2004-2005 $384,815,000
2005-2006 $400,977,000
2006-2007 $417,016,000
2007-2008 $433,697,000
2008-2009 $451,045,000
2009-2010 $469,087,000
The baseline revenue forecast for each year beyond the 2009-2010 shall be calculated based upon a 4% per annum increase from the previous year.
There shall be no tax reduction in any year in which the net revenue increase is less than one percent (1%). Any percentage increase below one percent (1%) shall be carried over and added to the next year percentage increase for purposes of calculating the rate reduction for that year.
The Director of Finance shall issue a detailed annual report on the net business tax revenue received each fiscal year and the basis for all calculations and carryovers and shall publish or otherwise publicize the revised rates for each year.
All business taxes shall be paid to the Director of Finance in lawful money of the United States and taxes required hereunder shall be paid in advance except where otherwise specifically provided, and shall be due and payable at the following times:
(a) Annual business taxes on the first day of January of each year;
(b) Quarterly business taxes on the first days of January, April, July and October of each year;
(c) Monthly business taxes on the first day of each month;
(d) Daily business taxes on each day;
(e) When a business discontinues, dissolves, or otherwise terminates before the expiration of a business tax period, any taxes accrued and owing to the City under the provisions of this article or Article 1.5, including any business taxes that would not otherwise be payable under the close of the business tax period during which termination occurs, or until time for paying the tax for the next succeeding business tax period, shall be due on the date of termination.
(f) When a person first becomes subject to business tax by reason of an amendment of this article, or because of such an amendment, becomes subject to business tax under a section not previously applicable to such person or on a basis not previously applicable to such person, any new or additional tax required to be paid by reason of this article, as so amended shall be due and payable upon the effective date of the amending ordinance unless an operative date different from the effective date of the amendment is specified therein. (Added by Ord. No. 128,639, Eff. 11/30/64.)
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