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Head of LA Office of Finance Casts Doubt on How New Los Angeles Internet Business Tax Ordinance Will Be Applied -- May Not Help All the Internet Businesses at Risk.

LegalZoom heading for the exit to more business-friendly location

HOLLYWOOD -- Despite the best efforts of the Mayor, City Council and the Hollywood Chamber of Commerce, LegalZoom is making plans to leave its Hollywood headquarters as a result of recent statements by the head of the Office of Finance (OOF) indicating that the new Internet Business Tax won't resolve its issues with the gross receipts tax. The recently passed Internet Business Tax ordinance is intended to create a more reasonable tax rate structure for these new companies that don't fall clearly into one of the city's existing business categories. Of three large Internet companies that were intended to be helped by the law - Shopzilla, LegalZoom and Fandango - it appears that the ordinance may only fully apply to Shopzilla, according to a statement made by the head of the OOF before the Budget & Finance Committee of the City Council prior to the adoption of the ordinance.

"Antoinette Christovale, general manager of the OOF, stated at the public hearing that in her opinion this new ordinance will not help LegalZoom. The OOF continues to try and categorize a significant portion of LegalZoom's work as professional services on a par with any of the big law firms. LegalZoom does not dispense legal advice or employ hundreds of attorneys. It's an apples and oranges comparison," said Leron Gubler, president, Hollywood Chamber of Commerce. "If the OOF isn't going to apply the ordinance as intended we won't just lose this major employer but our ability to attract other Internet businesses to the city."

LegalZoom's 400 employees may now be headed to more business-friendly locations. The firm is said to be looking at office space in nearby cities such as Glendale that does not have any business tax. Further, Austin, Texas has courted the firm.

"The Chamber has worked closely with LegalZoom and the city for about the past 18 months to create a solution. It is discouraging and frustrating to see all that effort be for nothing because a city department disregards the intent of the Mayor and City Council," Gubler added. "Apparently the OOF believes an Internet company that provides good customer service, like LegalZoom, that has a phone number where its customers can actually speak to a person who can answer questions about legal forms and not just offer technical support, should pay the higher gross receipts tax rate in order to offer that good customer service."

"Internet businesses are the future. They offer well-paid quality jobs and a source of revenue for the city. It is difficult to see Los Angeles' efforts to attract these companies undermined by a city agency," he concluded.
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Publication:Business Wire
Date:Apr 6, 2010
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