Watch Out for City Taxes!!!
As if it wasn’t bad enough having to deal with federal and state income taxes, payroll taxes, sales taxes, excises, etc. - there's a whole separate level of taxation that can rear its ugly little head to bite you in the sensitive bits if you're not careful. It's city taxation, sometimes called business licenses.
Some cities, notably in NY, PA and OH have their own city income tax (New York and Philadelphia, we're looking at you, along with virtually every city, town, hamlet and burg in Ohio). Many cities here in California have business license taxes, most notably Los Angeles. Here's a charming excerpt from the City of Los Angeles website on this topic:
“If you are self-employed, your business address is outside the City of Los Angeles and you work within the City of Los Angeles for seven days or more in a calendar year, you are considered an eligible business and must apply for a Business Tax Registration Certificate.”
Of course, this is phrased using traditional tax-collecting words like “must”, “requirement” and such. Be that as it may, if you want to keep your nose clean and stay free of penalties and fines, you should figure out a way to comply with their requirements.
Fortunately, many of these requirements are not too onerous, where they charge a modest annual fee of some sort to be in, or come into, their city to do business. Some, like Los Angeles, actually levy a tax based on income. If you're based in their city, you probably have to compute the tax on all your income. If you're based outside, you probably only owe based on income earned in their city. However, some cities (like Los Angeles) have exceptions or exemptions for businesses earning below a certain fairly generous threshold, AS LONG AS YOU REGISTER FOR THEIR TAX AND FILE YOUR TAX RETURN ON TIME EVERY YEAR.
So, as long as you register and file… no tax! If you mess up, you'll not only owe tax, but interest and penalties, too. In these days of an ever-improving Big Brother, it's only a matter of time before they figure out that you're making money on their turf and come after you for a slice.
There are websites you can search to find out if the city you're in, or any of the places you do business, have such requirements, and what they might be. Here's are a couple if you live in California:
We wish you all the best with your business and want to make sure you navigate these sometimes treacherous waters safely. Should you need further assistance, please feel free to CONTACT US. We're here to help!