{"id":2911,"date":"2016-09-15T21:50:06","date_gmt":"2016-09-15T21:50:06","guid":{"rendered":"http:\/\/www.afm47.org\/press\/?p=2911"},"modified":"2020-02-18T11:30:36","modified_gmt":"2020-02-18T19:30:36","slug":"dont-get-penalized-file-for-your-la-business-tax-exemption","status":"publish","type":"post","link":"https:\/\/afm47.org\/press\/dont-get-penalized-file-for-your-la-business-tax-exemption\/","title":{"rendered":"Don\u2019t Get Penalized! File for Your LA Business Tax &#038; Creative Artist Exemption"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-2913\" src=\"https:\/\/afm47.org\/press\/wp-content\/uploads\/2016\/09\/BUSINESS-TAX-746x1024.jpg\" alt=\"business-tax\" width=\"350\" height=\"481\" srcset=\"https:\/\/afm47.org\/press\/wp-content\/uploads\/2016\/09\/BUSINESS-TAX-746x1024.jpg 746w, https:\/\/afm47.org\/press\/wp-content\/uploads\/2016\/09\/BUSINESS-TAX-219x300.jpg 219w, https:\/\/afm47.org\/press\/wp-content\/uploads\/2016\/09\/BUSINESS-TAX-768x1054.jpg 768w, https:\/\/afm47.org\/press\/wp-content\/uploads\/2016\/09\/BUSINESS-TAX-624x857.jpg 624w, https:\/\/afm47.org\/press\/wp-content\/uploads\/2016\/09\/BUSINESS-TAX.jpg 1665w\" sizes=\"auto, (max-width: 350px) 100vw, 350px\" \/>If you are defined as a &#8220;creative artist&#8221; under the Los Angeles Municipal Code, you might be eligible for the Business Tax Exemption provision.<\/p>\n<p>Under the Small Business Exemption, no tax is required of creative artists whose total annual taxable and nontaxable gross receipts attributable to creative activities do not exceed $300,000.<\/p>\n<p>This exemption applies strictly to individual &#8220;creative artists&#8221; (individual, individual acting as a loan-out corporation, or individual acting through a limited liability company), when performing &#8220;creative activities&#8221; for &#8220;entertainment or aesthetic purposes.&#8221; It only applies to those receipts the creative artists earn from their creative activities and does not include income from any other source.<\/p>\n<p>The exemption is available as of Jan. 1 during the business tax renewal period.&nbsp;Businesses must file a renewal in a timely manner in order to receive the exemption.<br \/>\n<!--more--><\/p>\n<p>The creative activities exemption is only available to registered businesses, and not new businesses. A qualifying new business that started between Jan. 1, 2010 and Dec. 31, 2015 is eligible for an exemption of the business tax for up to the first three years of operation. Small businesses with total global\/worldwide gross receipts of less than $50,000 in 2005 and $100,000 in 2006 and forward are eligible to apply for an exemption.<\/p>\n<p><strong>The exemption for creative artists took effect on July 1, 2005. I am an artist covered by the exemption. Do I have to file and pay City business taxes on taxable income for prior years?<\/strong><\/p>\n<p>Yes, if you never paid the tax, the City has the right to collect business taxes as far back as eight years from the date of registration. (Note: LAMC provided a $5,000 threshold for a small business exemption for tax years 2003, 2004, and 2005. An ordinance amendment raised the threshold to $50,000 on July 1, 2005 applicable for the 2006 renewal period. The threshold for the exemption was raised to $100,000 on July 1, 2006 and is applicable for the 2007 renewal period and beyond.)<\/p>\n<p><strong>I am an existing business registered with the Office of Finance. How do I apply for the creative artist exemption?<\/strong><br \/>\nAll annual business taxes are due January 1 and delinquent on March 1. You must file renewals prior to March 1. If your global\/worldwide gross receipts for creative activities do not exceed $300,000, you may claim the exemption at the time that the business tax renewal is filed.<\/p>\n<p><strong>Where do I apply for the exemption?<\/strong><br \/>\nYou must be registered in order to qualify for an exemption. If you already registered, you may request the exemption on the renewal form at <a href=\"http:\/\/finance.lacity.org\" target=\"_blank\" rel=\"noopener noreferrer\">finance.lacity.org<\/a>. If you are not registered, you must call or visit one of the branch offices so you may receive assistance in obtaining a Business Tax Registration Certificate. You must also report and pay any applicable taxes for the last three years.<\/p>\n<p><strong>Can I qualify for both the small business and creative artist exemption at the same time?<\/strong><br \/>\nNo. You cannot simultaneously apply for the general small business exemption and the creative artist exemption, unless each business is a separate entity. Taxpayers who have gross receipts derived from the creative artist category or are eligible for the small business exemption should claim the exemption that is most beneficial to them.<\/p>\n<p><strong>I live in Los Angeles but do all of my work in another city. Am I subject to the tax?<\/strong><br \/>\nMany creative artists have a home office in Los Angeles but do much of their work outside of Los Angeles. If you do business both in and out of L.A., you can apportion the out-of-City gross receipts.<\/p>\n<p><strong>I am currently unemployed but earned income in the prior year. Do I pay taxes?<\/strong><br \/>\nYou need to file a business tax renewal prior to March 2 if you intend to engage in business in the City during the current year. If you earned less than $300,000 in creative activities during the prior year, you should request a creative artist exemption when you file your business tax renewal. You must not cancel your Business Tax Registration Certificate if you intend to engage in business. If the Business Tax Registration Certificate is cancelled and you ultimately engage in business during the current year, you will be subject to any tax due and applicable late charges.<\/p>\n<p><strong>If I receive residuals or royalties from Performance Rights Organizations (such as ASCAP or BMI) for work I performed as a creative artist in 1979, how are they taxed?<\/strong><br \/>\nIt depends on many factors:<\/p>\n<p>\u2022 If you are no longer engaged in business or retired and you receive only a check for residuals or royalties, they are not subject to tax.<\/p>\n<p>\u2022 If you are engaged in business, but in a different tax classification than that from which the residuals\/royalties were earned, you are not subject to tax for those residuals\/royalties.<\/p>\n<p>\u2022 If the services you performed in 1979 were as a W2 employee, you were considered not engaged in business, thus the residuals\/royalties are not subject to tax.<\/p>\n<p>\u2022 If you remain actively engaged in business and the residuals\/royalties earned in 1979 were for services performed entirely outside the City, and you take no home office deductions on your Federal and State tax returns, and perform no administrative functions in the City, the residuals\/royalties are not included in your tax measure.<\/p>\n<p>\u2022 Residuals\/royalties received as compensation for services performed within the City by a person paid on a 1099 are taxable if the person is still engaged in business.<\/p>\n<p>\u2022 If you performed services both in and outside the City, the residuals\/royalties are subject to apportionment. (Note: In the situation where a creative artist is actively engaged in business, the residuals\/royalties still count toward the $300,000 creative artist exemption threshold whether they are included in a person&#8217;s tax measure or not.)<\/p>\n<p>For answers to more frequently asked questions and for additional information, visit the Los Angeles Office of Finance website at <a href=\"http:\/\/finance.lacity.org\/entertainment-creative-talent-faq\" target=\"_blank\" rel=\"noopener noreferrer\">finance.lacity.org\/entertainment-creative-talent-faq<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you are defined as a &#8220;creative artist&#8221; under the Los Angeles Municipal Code, you might be eligible for the Business Tax Exemption provision. Under the Small Business Exemption, no tax is required of creative artists whose total annual taxable and nontaxable gross receipts attributable to creative activities do not exceed $300,000. This exemption applies [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","footnotes":""},"categories":[5,596],"tags":[818,819],"class_list":["post-2911","post","type-post","status-publish","format-standard","hentry","category-news","category-features","tag-los-angeles-business-tax","tag-tax-excemption"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Don\u2019t Get Penalized! 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