L.A. Offers Amnesty to Firms That Still Owe Business, Payroll Taxes

If you own, operate or do business in the city of Los Angeles and haven’t paid city business or payroll taxes, next month is your chance to begin to make good and escape stiff penalties.

The city of Los Angeles kicks off a three-month business tax amnesty program Oct. 1.

Businesses that have been remiss in paying taxes on gross receipts and payroll expenses can escape a 40% penalty by filing amnesty tax papers by year end. Interest, however, will still be collected on the taxes that are past due.

City Clerk Elias Martinez estimates that the city will collect $2.3 million in overdue taxes. Los Angeles collected $180 million in combined business and payrolls taxes this year.

“We’re imitating what the state did on the income tax with their amnesty program, which was quite successful,” Martinez said.

The amnesty program also provides businesses an opportunity to clear up city tax matters before January, when failure to pay such assessments becomes a criminal offense.

“In the past, we have had civil prosecutions against people who didn’t pay,” Martinez said. “The city attorney’s office believes the criminal court carries more weight.”

Martinez and David Welsh, a partner at the accounting firm of Deloitte Haskins & Sells and director of the Los Angeles Taxpayer Assn., said that part of the delinquency problem results from simple ignorance of the tax requirements.

“I have had some people tell me that they were audited and that they were totally unaware that the city had a business tax,” says Welsh whose association is primarily concerned that everyone pay their fair share of the tax burden. The association is sponsoring a special special tax amnesty workshop on Tuesday at the Bonaventure beginning at 10 a.m.

To qualify for amnesty, businesses must file an application for amnesty, file complete tax returns for all periods, pay the tax and interest due in full. If full payment can’t be made, the City Clerk is authorized to arrange for an installment agreement for payments after Dec. 31, 1985.

The business tax rate ranges from $1 per $1,000 for wholesalers to $5 per $1,000 worth of business for attorneys, certified public accountants and other professionals. The business tax also applies to those businesses that send employees into Los Angeles to sell, install equipment, meet with clients or make deliveries.

The payroll tax, which was added two years ago, is $7.50 per $1,000 of wages. The tax is aimed at certain businesses, such as sellers of alcoholic beverages, which are exempt from the city’s business tax.