> ## Content Index > Fetch the complete content index at: https://www.smdp.com/llms.txt > Use this file to discover other available public pages before exploring further. # Home business taxes, fees to be reconsidered - URL: https://www.smdp.com/home-business-taxes-fees-to-be-reconsidered/ - Published: 2005-05-24T15:00:00.000Z - Updated: 2026-10-23T07:11:30.000Z - Author: Ryan Hyatt - Tags: Business, Santa Monica, #archive-import *Billed home businesses have seen fees waived* CITY HALL — Artists, writers and other Santa Monica residents working from home may soon qualify for city tax and fee exemptions that would save them money. The Santa Monica City Council directed staff last week to come up with a proposal to amend City Hall’s current business license law to provide a small business exemption and to lower the home business planning fee and assessment on a one-time only basis. City staff has prepared the change so that small business owners with annual gross receipts of up to $40,000 would be exempted from paying the city’s business license tax. The council is set to discuss the change on Wednesday, with the hopes of adopting it in time to be part of the July 1 billing cycle. Councilman Kevin McKeown said he has been pushing hard for a repeal of the small home business tax for a number of reasons, including sustainability issues — arguing that people working at home don’t commute and pollute as much, and tend to dine and shop close to home. “Everyone benefits with fewer cars on the road going from home to work and back,” McKeown said. > “Everyone benefits with fewer cars on the road going from home to work and back.” — KEVIN MCKEOWN Santa Monica City Councilman McKeown also said he believes local businesses and restaurants thrive on neighborhood customers who don’t spend their money out of town, near their respective places of employment. “Santa Monica seeks sustain-ability — environmentally and economically — and removing the small home business tax would be an incentive for creating a more sustainable local lifestyle,” McKeown said. “Any revenue loss to the city might be partly balanced by a bump in local sales tax, as Santa Monica neighborhood businesses gain home-working daytime customers.” City Hall’s audit of the number of home businesses within Santa Monica over the past year has shown there are a significant number of very small businesses located within the city. As of April, approximately 75 percent of the new businesses licensed during the audit reported less than $40,000 in gross receipts during 2004\. In many instances, those businesses are operated from the owner’s home. Officials discovered the nonpaying businesses by comparing the city’s business license data-base against state tax returns, documents they’ve had access to since legislators passed AB 63 in 2001, according to Steve Stark, City Hall’s director of finance. Any business that grosses less than $60,000 a year in Santa Monica must pay an annual $75 licensing fee, plus $20 for having the fee processed. Businesses that earn more than $60,000 pay a percentage depending on the services they offer. MBIA, an outside consultant, was hired to bill unlicensed businesses under a contract that entitled them to 30 percent of any revenue collected. Businesses were billed for unpaid licenses dating back to 2001, plus penalties of 100 percent — but those penalties and fees were later waived. Not just home businesses were targeted, according to Stark, who said any unlicensed business that turned up by comparing the two documents was billed for back fees. Though there are exceptions for things like garage sales and lemonade stands, nearly any business that generates revenue requires a license. A few business activities, such as administrative offices, taxicabs, delivery services and lunch trucks, are taxed on a basis other than gross receipts and excluded from the proposed exemption. The tax revenue the city receives from small businesses with up to $40,000 in gross receipts represents a little less than 3 percent of business tax collections, according to city staff. Business license tax revenue would be reduced by an estimated $320,000 per year. In addition, City Hall would forgo other fees and charges collected in connection with the business license tax — such as late payment penalties and planning review fees — of approximately $220,000 for a total potential reduction of up to $540,000. There would be no reduction in administrative costs since all self-employed individuals will continue to register for an annual business license in order to both ensure that only qualified businesses are exempted from the tax and that all city permitting and other requirements are met. However, the staff report said impacts of a tax on small businesses can be significant. Former City Councilwoman Cheryl Rhoden, a representative of the Screen Writers Guild, suggested that City Hall consider creating a special tax exemption applicable to screenwriters who work in their homes as independent contractors for studios or production companies. Such independent contractors fall into a special category under state law, and the Guild has requested that City Hall give those in that category special tax treatment by exempting them from the business license tax on the general theory that they do not operate businesses. The staff report said the Guild made the same request to the city of Los Angeles, which reportedly denied their request, but instead created an exemption for all creative talent in the industry earning gross receipts of under $300,000 per year. “The artists I represent are not businesses, they are employees working for employers,” Rhoden said. “In any given year, half of the writers do not work. There are long cycles of unemployment.” Rhoden said that if the city reconsidered the way it taxed and charged the types of workers represented, it might go far to help support the endeavors of these individuals. *Originally published in the Santa Monica Daily Press print edition on May 24, 2005.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/052405.pdf?ref=smdp.com)