All internet- related businesses in the city of Los Angeles are getting a business tax rate change. Recently, the Los Angeles City Council approved a lower business tax category just for Internet companies.
Los Angeles has an estimated 1,400 Internet-related business and some have been recently reclassified into a multi-media tax category with a business tax rate of $5.91 per $1,000 of gross receipts. With the Council’s unanimous vote these businesses will now be moved back to $1.01 per $1,000 gross receipts. The Internet Business Tax Ordinance reduction will be retroactive to Jan. 1.
Mayor Antonio Villaraigosa signed a lower tax rate for the city's growing Internet-based business sector at Shopzilla.com and stated, "The city is once again proving its commitment to generating jobs and providing a business-friendly environment for every business."
One internet business LegalZoom.com, America's #1 legal document service threatened to leave the city of LA because it was reclassified into the professional services category or the higher business tax rate. Last year , Shopzilla.com business tax rate jump the lowest in the city to the highest after the reclassifying them from multimedia businesses into the "business and professions" category.
The argument has been LA will lose tax revenue generated by these companies if they left the city of LA. The city of LA faces a $212-million shortfall in the city budget this fiscal year.
With the business tax change Council President Eric Garcetti said, “The city is expected to lose $3.4 million a year in business tax revenue this year," said Garcetti. “It’s the right thing to do on dollars and cents.” Garcetti. Garcetti the author of the bill stated a study done by the Rand Corporation showed more than 1,000 jobs have left the city because of the internet reclassification.