Tax on Home Businesses

Re “Tax on Home Businesses,” June 8, Letters to the Valley Edition.

Contrary to the impression left by the letter and by several newspaper reports, no new home business tax has been created. Home-based businesses, like every other business in the city, have always been required to pay business taxes.

Regrettably, what seems to be getting confused is the difference between the Home Occupations Ordinance and the city’s gross receipts tax on professional businesses. In March 1997, a Home Occupations Ordinance was enacted by the City Council that now officially permits quiet home-based businesses to operate from a home if they meet 21 performance standards. The only new fee associated with the ordinance is a $25 registration charge for the Home Occupations Permit. Other cities in California also require a similar fee to register a home-based business and professionals who work from their home.

Until the Home Occupations Ordinance was approved, Los Angeles was one of the few major cities in the nation whose antiquated zoning laws prohibited anyone from operating a business solely out of a residence, even when the business merely entailed the quiet use of a computer, phone and fax machine.

In no way does the Home Occupations Ordinance address taxes, nor does it change the city’s taxes on home-based businesses. The real problem is our current tax structure on businesses, which contains a minimum tax on all businesses (averaging about $110) regardless of how much income they generate, plus a gross receipts tax (which has its own inequities and problems). The council and the mayor are comprehensively addressing the impacts of our present tax structure on small businesses through a tax equity study now underway.

Additionally, Councilman [Mike] Feuer and I also authored a motion to look into constitutional concerns raised by writers and other professionals in creative fields with regards to taxation issues, as well as review the minimum threshold at which gross receipts taxes would be applied to professional businesses.

LAURA CHICK

Los Angeles City Council,

3rd District