Q: What is the AB63 tax enforcement program?
A: As a result of recent state legislation, the California State Franchise Tax Board (FTB) is now authorized to disclose certain records related to business activities of residents, corporations, and other entities within the City. By matching the data to our existing records we now have an additional, effective tool to identify unregistered businesses within the City.
Q: Why did I receive a FTB notification?
A: Our records from the FTB show that you are or the named entity is reporting some type of business activity to the FTB using a Long Beach address. This indicates you may be operating a business in the City that has not yet obtained a Business License Tax certificate.
Q: I am not doing “business.” What does the City of Long Beach consider to be a business and why do they think I am operating one?
A: Per Municipal Code §3.80.133 – “Business”: means all activities engaged in or caused to be engaged in within Long Beach, including any commercial or industrial enterprise, trade, profession, occupation, vocation, calling, or livelihood, including rental or lease of residential or nonresidential real estate and mobilehome parks, or independent contractors, whether or not carried on for gain or profit, but shall not include the services rendered by an employee to his employer.
State law (Business and Professions §16300) requires cities to use the way a taxpayer reported income to the IRS and Franchise Tax Board to determine whether the taxpayer performed services as an employee or as a separate business entity. A person who is an employee and whose compensation is reported on a Federal W-2 is not in business and is not subject to the business tax.
Q: I do some minor consulting on a part-time basis. Do I have to get a Business License?
A: Yes, businesses both large and small are required to obtain a Business License to be in compliance with the Municipal Code. If the consulting work is performed as an independent contractor and attributable to a location within the City limits, such as your residence, a tax liability exists.
Q: I receive a 1099 form instead of a W-2 from my work. Am I required to have a City of Long Business License?
A: Yes, those that work as an independent contractor and are paid by 1099 versus W-2 are liable for a City of Long Beach Business License. State law (Business & Professions Code §16300) prohibits the imposition of business license tax on employees. In the case of a dispute between a taxpayer and the local agency, the local agency must defer to how the taxpayer reported income to the FTB.
Q: My business entity (Corporation, LLC, Partnership, etc) is entirely passive and/or dormant and it is just paying a minimum tax to the Secretary of State. Is it required to get a license?
A: If your business entity represents business conduct to the public at large (such as through letterhead, the receipt of rent checks, etc) in addition to being registered as active with the Secretary of State and reporting on a business return with the FTB and IRS, it will need a license.
Q: I live in Long Beach, but my business is located outside the city limits. What are my liabilities for the City of Long Beach?
A: As long as all business activity is conducted outside the City of Long Beach, there is no need to obtain a City of Long Beach Business License.
Q: What remedies are available to me? I do not feel I conduct business here and I want to be taken off your list.
A: You may complete a Business Assessment form, (link to form). This will be reviewed and a determination will be issued. Please see the instructions on the form for further details.
