Have you received a letter from the City of Los Angeles Office of Finance? First of all, do not ignore. Second, it may not be as bad as you think.

Before going any further, it is important to note that this is NOT an income tax issue. Thus, we do not claim expertise in this area; but we do attempt to offer some basic information and guidance since we have dealt with the issue exhaustively. We cannot represent you in front of the City of Los Angeles. We can only encourage you to get your license on time and renew it annually on time. That said, here are some things we have learned over the years.

Any year in which you perform services as an independent contractor in exchange for non-employee compensation (IE. Cash or 1099 income), you are subsequently required to file a Schedule C on your Income Tax Return. The title of a Schedule C is “Profit or Loss from a Business”. As such, whether intended or not, the IRS and by extension, the City of Los Angeles, considers you to have a business, and the City of Los Angeles requires you to have a Business License in order to operate within the city limits. If you live inside the city limits of Los Angeles, then your business is considered to be operation there even if your income comes from outside of the city limits.

An exemption is available for up to $100000 in income, or in the case of Creative Artists, up to $300000. However, in order to obtain the exemption, the initial filing must be done by the last day of the following month of the start date of the business. Thereafter, to receive the exemption each year, the renewal must be timely filed by the last day of February (or the following Monday in the event that the last day falls on a weekend).

Often when letters come from the city they come with a substantial monetary demand. You may not have made as much money as the city is claiming that you have made on the form. Be sure to look for the Basis. You may need to call the number on the form or go to a local office to straighten things out from there. Remember, the tax only has to do with your independent contractor income, NOT your W2 income. Unrelated income should be irrelevant to the correspondence you have with the City.

NOTE: Work performed outside the City of Los Angeles is a part of the calculation if your base of operations in within the city limits. However, only “20% of gross receipts from work performed outside the City shall be deemed to be that portion subject to tax as attributable to business engaged in within the City.”

For further information visit the Los Angeles office of Finance :

For a Business Tax Registration:

Annual Renewal: