City, county battle over business tax DISPUTE: L.A. accused of charging fees in unincorporated areas.

Byline: Troy Anderson, Staff Writer

As both the city and county of Los Angeles face severe budget crunches, a new feud is brewing between the two governments over taxes, with hundreds of businesses caught in the middle.

The county claimed this week that the city is illegally taxing and requiring permits from at least 700 businesses in unincorporated areas of the county, including Universal City, Sunland-Tujunga and Quartz Hill.

The Board of Supervisors on Tuesday passed a motion demanding the city stop the practice and reimburse the businesses for the tax payments.

"The city of Los Angeles is attempting to take money illegally from unsuspecting taxpayers," Supervisor Michael D. Antonovich said. "This is unheard of. They are such a conniving group. ... They have already bankrupted the city and now they are trying to take money from other areas to support their spending frenzy."

But city officials contend they are within their rights to impose the taxes and permits on some businesses located outside the city's boundaries.

Antoinette Christovale, director of the Los Angeles City Office of Finance, said the city, under its municipal code, can tax businesses located in unincorporated county communities that are engaged in business in the city.

"Given the (criteria in municipal code), businesses located in unincorporated county communities who fall under this section are obligated to obtain a city business license and pay any applicable tax," Christovale wrote in an e-mail to the Daily News.

"Businesses self-register, report and renew their business license annually with the city based on this criteria."

The clash is coming as the city continues struggling to overcome a $405 million deficit, weighing potential layoffs and other cuts. The county, too, has struggled with budget woes and on Thursday announced the layoffs of about 40 part-time library workers.

Stuart Waldman, president of the Valley Industry and Commerce Association, said the investigation uncovered a serious problem that needs to be addressed.

"I'm glad that somebody found this out and is working on it," Waldman said. "Businesses should really only be paying taxes where they are actually doing business."

Victor Viereck, president of the Universal City-North Hollywood Chamber of Commerce, said the businesses he represents have had problems with the city's Office of Finance before.

"I don't think the Office of Finance is on top of their own records," Viereck said. "If they kept their records in the proper manner, they wouldn't have to contact business people to find out if they have taken care of (their licenses.) They are wasting their own time, which means our tax money, by not doing their job properly."

The investigation began in late 2008 when the Sheriff's Department informed the County Counsel's Office that a medical marijuana dispensary in an unincorporated area was operating under a city business license, county Auditor-Controller Wendy Watanabe said.

Watanabe's office, in conjunction with the County Counsel's Office and Treasurer & Tax Collector's Office, reviewed a sample of business licenses in unincorporated parts of East Los Angeles and discovered about 15 percent of the businesses had city business tax licenses or other permits.

Investigators later discovered the practice also occurred in other unincorporated communities, including Universal City, Sunland-Tujunga, Charter Oak, Hacienda Heights and Quartz Hill, which are subject to county zoning and business requirements.

Private-sector businesses located in unincorporated communities are subject to county zoning and business license requirements, Supervisors Gloria Molina and Antonovich wrote in a joint motion.

"For reasons that are not entirely clear, the city of Los Angeles has been issuing business tax licenses and police alarm permits to some of these businesses," the supervisors wrote in the motion.

Watanabe said some of the businesses with city licenses were found in areas that share city and county borders.

"The business owners are confused," Watanabe said. "They know they need a license, but they may have been getting a license through the city unnecessarily."

But Antonovich said some of the businesses were 30 miles outside the city's borders.

As part of the investigation, Watanabe's office asked the city for the list of the businesses in unincorporated areas issued city business permits. Watanabe said the city sent her a list of about 700 businesses and she believes there could be more.

Watanabe forwarded the list to the Treasurer & Tax Collector's Office for further review. Watanabe's office also contacted city officials to alert them to the problem.

Mayor Antonio Villaraigosa's office did not return calls for comment.

In her e-mail, Christovale wrote her office is in contact with Fujioka's office "to resolve this matter."

Jon Coupal, president of the Howard Jarvis Taxpayers Association, said government agencies often attempt to collect unwarranted taxes from individuals and businesses.

"It's really important for taxpayers to figure out whether or not they are even liable for these taxes," Coupal said. "Don't trust government when it tells you you have to pay a tax because, quite frankly, the government makes mistakes all the time."

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