Introduction
In 2025, the City of Los Angeles introduced new exemptions and updated gross receipts tax rates that directly affect local small businesses. It’s critical to understand these changes to avoid fines and optimize compliance.
1. Expanded Small-Business Exemptions
- New threshold: Micro-businesses earning under $100,000 annually now qualify for full exemption.
- Creative industry carve-outs: Exemptions for visual artists, musicians, and local creative services.
- Eligibility action: Use the finance portal to confirm exemption each March.
2. Gross Receipts Tax Tables (2025 Rates)
- $0–$100K: Exempt
- $100,001–$1M: $1.01–$2.00 per $1,000
- $1M–$5M: $2.01–$3.00 per $1,000
- Over $5M: $3.01–$4.25 per $1,000
Rates vary by NAICS code—check your class to know where you fit.
3. Renewal Deadlines & Penalties
- Annual deadline: March 15
- Late penalties: 5% per month, up to 25% total—plus interest, starting April 1.
- Cal‑Biz‑File link: Use this to handle renewals and payments seamlessly online.
4. Planning to Reduce Your Bill
- Entity structuring: Splitting revenue between related entities may keep each below higher brackets.
- Payroll credits: Hiring interns or apprentices could make you eligible for state credits.
- Timing revenue: If you’re nearing a bracket, consider delaying sales until next year (if cash flow allows).
5. Staying Compliant
- Annual filing: Submit even if exempt
- Keep documentation: proof of exemptions and revenue
- Third-party reporting: Required if you use gig platforms, even for exempt thresholds.
Conclusion
Staying current with LA’s evolving tax landscape can save money and keep your business in good standing.
Need help? Book an exemption review with Prudential Tax Advisory Group and ensure you’re paying what you owe—no more, no less.
