L.A. Firms Get a Break on Tax Code

The City Council voted unanimously Tuesday to simplify the tax code for businesses, and promised more changes in coming months to make life easier for business owners and attract commerce to the city.

The changes will cost Los Angeles an estimated $2.9 million a year in lost taxes. But council members and business lobbyists said they think the loss eventually will be offset by increased revenues as companies that were wary of the complex tax structure move in.

“Today we want to send a clear message to businesses of all sizes,” said Councilwoman Wendy Greuel, who helped draft the rule change. “We want to ... be more business-friendly.”

The change allows companies to file under a single tax rate if 80% of their gross receipts fall under one category of commerce. Currently, the city has 64 tax categories and eight tax rates.

Until the rule change, businesses with more than one category of sales -- for instance, a company that fixes cars and also sells rearview mirror-hanging air fresheners -- had to pay two tax rates.

“We lost hundreds of businesses” to Glendale, Burbank and other cities because of the complicated system, said Fred Gaines, chairman of the Valley Industry and Commerce Assn.

City officials estimate that of the 12,000 businesses in 2001 that filed under more than one tax category, 10,800 will pay a lower tax under the new system. Participation in the program is optional.

Councilman Hal Bernson said he supported the plan, but urged more changes.

“I don’t know if it went far enough,” he said. “There are areas throughout the world that actually pay companies to come in.”

Other council members said more changes are coming.

“As we give this gift back on tax day, we say, ‘This is only the beginning,’ ” Councilman Eric Garcetti said. “This begins the journey we will have over the next year of comprehensive business tax reform.”