"Ax The Tax," say Sherman Oaks Merchants

For 15 years, Stan Gerson, a realtor with Beitler Commercial Realty Services, says he’s watched business owners reject leases along Ventura Boulevard and other parts of
Sherman Oaks.

“Many people want to lease property, but they don’t want to pay the city’s gross receipts
tax, so we have to take them to Glendale or Burbank,” Gerson says. “I run into it a lot.
It’s just something you hear all the time, every day.”

Now, relief may be coming. A study requested by the Los Angeles City Council has proposed eight different revisions to the gross receipts tax, including doing away with it entirely.

Mayor Antonio Villaraigosa said he favors dumping the tax which Sherman Oaks dentist Robert Cohen calls “gross in a lot of ways.” As head of the Sherman Oaks Chamber of Commerce, Cohen has for years pushed for reductions or elimination of the tax.

The 63-page report issued Aug. 3 by the Business Advisory Tax Committee (BATC) may provide some hope for that. According to the report, Los Angeles’s gross receipts tax is one of the highest in the region. Indeed, the report says very few cities across the Untied
States have a tax as high as Los Angeles, except for cities in the northeast and Ohio.

The way the gross receipts tax works is that businesses fall into nine different taxing categories, with rates from $1.01 to $5.07 for each $1,000 earned. Business owners must pay yearly taxes on their gross earnings. So, the same dollars are paid whether a business
is profitable or suffers a loss, whether it has minimal expenses or lots of them such as payroll, supplies and equipment, rent, gasoline, car loans, other taxes, fees and any other expenses.

“Maybe the tax would be a little more fair if it was on net sales,” said Bob Snyder, owner of Signs of LA, on Sepulveda Boulevard. “As a small business, you get taxed at the state and federal levels, at the county level for the business property and then the city on your
gross sales. When you put it all together in a down economy, we’re struggling.”

Cohen says that when he started his dental practice his city taxes came to thousands of dollars, while a friend who opened a dental practice in Glendale paid only $100. For large auto dealers and big box retailers whose income is high but profit margins small, the gross receipts tax can be costly, hundreds of thousands of dollars. That’s why Los Angeles is perceived as business unfriendly and loses out on jobs and new business, Cohen says.

“I don’t know of any Fortune 500 companies that call Los Angeles home,” he said. “There’s a reason for it.”

Currently, the tax brings in $424 million to the city, 10% of all city revenues. Changes to the tax outlined in the report suggest that Los Angeles could lose up to $380 million in
city business taxes but could gain as much as $640 million in other revenues including sales and property taxes, utility and parking fees, and other income. More importantly, eliminating or reducing the tax could bring in hundreds of thousands of jobs.

The report will be discussed at 2:30 p.m. Aug. 17 in a City Hall meeting with various officials. Recommendations will be provided later to the City Council. The Los Angeles Chamber of Commerce and the Valley Industry and Commerce Association have both taken an “axe the tax” position. The Sherman Oaks Chamber board will meet soon and could likely take a similar position, Cohen said.

“We’ve been a strong advocate for evening the playing field in the county of Los Angeles for a long time,” he said.