How Cities can Help Small Businesses During a Pandemic

As small businesses are faced with the many insurmountable obstacles of COVID-19, local government can step in to help. Charles Crumpley with San Fernando Valley Business Journal explores one way local governments can relieve some pressure.

Local governments have been trying to help their residents through the coronavirus pandemic, and that’s great. But the city of Los Angeles has been particularly lax in helping its businesses. Here’s something meaningful the city of Los Angeles could do: declare a gross receipts tax holiday.In case you’re not familiar with it, the gross receipts tax is just that. It is a tax put on a company’s gross receipts or what most of us call revenue. The tax rates range from $1.01 for each $1,000 in revenue all the way up to $4.50 per $1,000, depending on what kind of business you have. (Professional service providers such as accountants and lawyers pay the top rate, wholesalers pay the bottom rate and most other kinds of businesses pay a rate in between).

“But if your complex were in the city of Los Angeles, you’d have to pay L.A.’s unusual gross receipts tax. The rate for those who rent property is $1.27 per $1,000, so your tax would be $6,350. Your income would be reduced by that amount, so you’d have $143,650 in income.

gain, it’s a tax on revenue, not on income. Even if you have no income from your enterprise or even a net loss, you still have to pay the tax. That’s completely unlike an income tax and why some argue that the tax is fundamentally unfair.

Business have long complained that the gross receipts tax is just that: gross. The city of Los Angeles has long promised to do something about it, especially since most other cities don’t levy such a tax. But the city has done nothing meaningful.

This is a chance for the city of Los Angeles to help its businesses. Suspend the gross receipts tax until the pandemic has ended. 

Read more here.
Charles Crumpley is an Editor and Publisher of the San Fernando Valley Business Journal. He can be reached at ccrumpley@sfvbj.com.

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