$12 Million Lost to Business Tax Scofflaws : Government: Many of the firms that L.A. deals with the most do not pay their license fees, according to a study by the city controller.

Los Angeles is losing at least $12 million annually in uncollected business taxes--from the very companies it deals with the most, according to a study released Tuesday by City Controller Rick Tuttle.

City auditors discovered that about 30% of the companies regularly using city services have not paid their taxes. “It’s a case of the right hand not knowing what the left is doing,” said Tuttle, who as controller serves as a watchdog on the city’s finances .

The business license fees range from a minimum of $177 to thousands of dollars, based on the gross volume of business and the type of business. The average company pays slightly more than $1,000 a year. In all, the tax raises about $300 million annually from about 280,000 businesses.

To crack down on tax dodgers, Tuttle is recommending that the city deny non-emergency services, such as building permits or leases, to any business that has not paid its business license fees.

The list of unwelcome companies includes some of the largest and most visible businesses in the city.

At the Department of Airports, auditors found that 28.6% of the vendors--including National Rent-a-Car, Alamo Rent-a-Car and Exxon--had not paid their city taxes.

At the Harbor Department, 27.5% of vendors failed to pay city taxes, including such corporate giants as Heinz, Southern Pacific Co. and Western Steamship Lines.

More than 42% of contractors seeking building permits lacked the city’s business tax registration certificate, as did 42% of the movie companies seeking filming permits, including some of the largest in the business: Paramount Pictures, Steven Bochco Productions and New Line Cinema.

Attempts to reach many of the companies were unsuccessful Tuesday. Spokesmen for some companies said they were unable to immediately find anyone in their organizations who were familiar with the tax.

“You see those things (business tax certificates) in barbershops and pet stores all the time, but you don’t think of them in terms of a major corporation,” said Harry Anderson, spokesman for Paramount.

Upon checking, Anderson said later that Paramount’s records indicate that they paid their business license on time in February and they will look into the matter today. “It’s unfair of him (Tuttle) to say we are laggards,” he added. “We are not.”

Tuttle acknowledged that there could be some recording errors in the files.

The audit found that more than 19% of registered lobbyists had not paid their taxes to the city.

Some of the scofflaws are right under city officials’ noses: 7% of the businesses in the L.A. City Mall--the shopping strip built beneath City Hall--have failed to pay their business license fees, auditors found.

“It is inherently unfair for the city to allow some businesses to avoid their fair share of taxes, while the vast majority of businesses comply with the law,” said Tuttle.

“The solution . . . is to simply require proof of business tax compliance before services are provided,” he said.

Businesses needing city permits or licenses would be told to return when they have the business tax registration certificate, Tuttle said. Firms wanting to register with the city’s minority business programs would first have to see the city clerk and pay their back taxes.

In all, Tuttle’s auditors took samples from 24 city departments including Water and Power, Building and Safety, Rent Stabilization, Recreation and Parks, Animal Regulation, Transportation, the Bureau of Sanitation and the Board of Public Works. They cross-referenced companies using these departments’ services with the lists of companies that have paid their business license fees.

The city clerk, who collects the tax, maintains a staff of more than 200 to track down companies and audit their books to determine payment, according to City Clerk Elias Martinez. “We’re always getting leads,” said Martinez. “It’s a matter of limited resources,” he said referring to the suspected number of companies not paying their fees.

Though Los Angeles law does not require departments to check that taxes have been paid before they render services, other area cities do, including Monterey Park, Santa Monica, Torrance, Gardena, Long Beach and Beverly Hills.

On Tuesday, Tuttle took his proposal to the City Council’s Finance and Revenue Committee, where it received a warm reception.

“It’s right, and we need the money,” said Committee Chairman Zev Yaroslavsky. “There’s no free ride in this city. To the extent we can identify them, we’ll nail them.”

Yaroslavsky said that $12 million, while small in comparison to the city’s total budget of $3.9 billion, is still a significant amount of money. In the current fiscal year, the city had to cut $100 million out of the budget and impose a hiring freeze.

Under city law, officials can collect up to three years of back taxes, which means that the city could reap a one-time windfall of more than $36 million plus some penalties for late payment.

In a similar program several years ago, Tuttle refused to pay companies selling goods and services to the city until they paid their back taxes. That requirement is now city law.

Some departments are not enthusiastic about the latest plan. Still, Yaroslavsky on Tuesday directed several key city departments to report back to the committee in two weeks with a report on how the new policing program could be implemented.