Home-businesses have 15 days left
By CORTNEY FIELDING Special to the Daily Press
Months after receiving bills from City Hall for unpaid taxes and penalties, 350 artists, writers and other home-based workers have been granted amnesty in exchange for purchasing home business licenses.
City Hall in February began notifying 750 home business operators that they could avoid paying previously issued penalties for not registering their home business with the city if they applied for a license by mid-April.
Although city officials say they have seen a steady stream of home business operators apply since initiating the amnesty program, more than half of the residents issued bills have not come forward to purchase the required license.
City officials estimate that they will return or waive $300,000 in penalties, but beginning April 15, those that have not voluntarily applied for business licenses will be required to pay all of the penalties.
The required home business license has been on Santa Monica’s books for decades, but City Hall was incapable of enforcing it because it didn’t posses any official documentation specifying which residents were operating home businesses, according to Eva U’Ren, City Hall’s revenue manager.
“We had no real way to know,” U’Ren said.
That changed when California passed legislation in 2001 allowing local officials to investigate nonpaying businesses by comparing the city’s business license database against state tax returns.
MBIA, an outside consultant, was hired by City Hall last year to bill unlicensed businesses for tax and penalties under a contract that entitled them to 30 percent of any revenue collected. City Hall sent out letters to home business operators detailing the amount of back penalties owed, but was soon bombarded with calls from residents saying that they were unaware they needed to apply for business licenses. They contended the penalties were unfair.
“We didn’t even know we had to pay it, how would we know?” resident Rita Aikey told the Daily Press earlier this year. Aikey’s husband, a fine artist, works out of their apartment and sells up to $5,000 of his works a year. “My God, it’s like you’re so busy working and paying the bills, and you have to know everything. It’s frustrating.”
In addition to hundreds of dollars in unpaid business license fees dating back to 2001, residents were being handed down penalties of 100 percent for letting the dues slide. In response to numerous resident complaints, City Hall agreed to waive the penalties, at least for a temporary grace period.
“Most of the people said, ‘You know, I’m a citizen here. I live here. I work here.
I pay taxes. If I had known I needed a business license, I would have gotten one,’” City Hall Finance Director Steve Stark told the Daily Press last month.
But there were some residents who knew of the law and chose to ignore it, said Pamela McGarvey, City Hall’s supervisor of revenue operations.
“Some just chose not to apply (for a license),” she said.
City Hall doesn’t know how much it is actually losing each year from unpaid home business licenses because it has never known how many residents should be paying it, McGarvey said.
According to Santa Monica law, businesses that gross less than $60,000 a year in the city must pay an annual $75 licensing fee, plus $20 for having the fee processed. Businesses that earn more than $60,000 pay a percentage dependent on the services they offer. Receiving the license requires the applicant to fill out a form that can be handed in at City Hall or completed online.
Not all residents are satisfied with the temporary amnesty program. Mark Humphrey, a writer for syndicated radio programs who has worked for many years out of his Ocean Park apartment, said while he “is going to face the music and pay his business license tax,” he doesn’t feel he should be required to have a license.
“In a perfect world, I was hoping it would all just go away,” said Humphrey, who received a letter from City Hall last year.
While the business tax won’t go away this year, Councilman Kevin McKeown, an outspoken critic of the home business license said he would push the issue in front of the City Council this spring. But if the tax was repealed, it couldn’t be applied retroactively.
To inform residents about the April 15 deadline, City Hall has been running weekly advertisements in local papers and have placed inserts in utility bills since March 15. Details also have been displayed on the city Web site, and flyers have been placed in city facilities.
“Its never going to be 100 percent, but from the rate of response, it looks like it’s working,” said City Hall spokeswoman Judy Rambeau.
Originally published in the Santa Monica Daily Press print edition on March 30, 2005. Read the original PDF.