CITY REVISING ILLEGAL TAX LAWS.

Byline: Rick Orlov Daily News Staff Writer

Los Angeles city officials scrambled Tuesday to begin work to revise their business tax laws that a court recently ruled illegal.

The court decision could end up costing the city more than $10 million in lost revenue and fines.

Mayor Richard Riordan, in a letter to the council's Budget and Finance Committee, warned that it could mean cutbacks in city services this year with an unknown impact on next year's budget, which already faces a deficit of up to $250 million.

"As a result of this decision, the city must immediately revise the business taxes imposed on certain manufacturing and selling activities," Riordan said. "The city may already be exposed to liability to other Los Angeles taxpayers."

The ruling was handed down in June by a state Appellate Court in a case brought by General Motors. However, the state Supreme Court only recently decided not to hear the case and let the appellate ruling stand.

That ruling struck down the city's laws that exempted local manufacturers from a selling tax if they sold their goods only within the city.

It also overturned the laws charging a sellers tax to out-of-city manufacturers and those local firms that sold goods outside the city.

The Budget and Finance Committee urged the city to drop its manufacturers tax completely and go to a sellers tax for all businesses operating in the city.

City Administrative Officer Keith Comrie said such a move would minimize the impact of the loss of the manufacturers tax slightly, but that a firm estimate would not be available until later in the year.