LOCAL PERMITS & LICENSES
You’ll most likely need to register with your city and obtain a generic business license. You’re basically letting the city know you’re doing business within their jurisdiction. Your city may also impose a business tax, which is simply a tax for being allowed to operate.
You also might have to get additional permits depending on your industry. For instance, if you wanted to sell alcohol, you would need permission.
In California, refer to the CalGold (California Government: On–Line to Desktops) website for information about business license/permit requirements.
For example, here are my dealings with Los Angeles:
All individuals or entities conducting business activities within the City of Los Angeles are required to apply for and obtain a Business Tax Registration Certificate with the City of Los Angeles, Office of Finance.
So this certificate allows me to conduct business and allows the city to tax me. I have to renew this license every year by January 1st and pay for the previous year's taxes.
Depending on your type of business, you’ll be assigned specific tax rates. There are several categories but these pertain to general sales:
Retail Sales: $1.27 per $1000 of gross receipts
Wholesale Sales: $1.01 per $1000 of gross receipts
Sellers who are engaged in both retail sales and wholesale sales are subject to both types of taxes. In these instances, it will be necessary to segregate the sales and pay a business tax for each classification.
You’ll notice the formula is based off gross receipts, not net profit. So if I have $50k in revenue but $60k in expenses, I still pay the tax on the 50k, even though my business lost money. Terrific.
They do add this though:
Receipts, which may be excluded from Retail and Wholesale Business Taxes, are the following: Out-of-State sales, which are shipped by the seller directly to the purchaser to points outside the State of California.
So any sales outside California don’t count towards the tax.
The City of Los Angeles receives its electronic payments via the Federal Automated Clearing House (ACH) system.
Also be on the look out for any exemptions your city might offer. Los Angeles currently offers a big one:
Small Business Exemption: A small business with $100,000 or less of taxable and nontaxable gross receipts within and out of the City.
So if my revenue is under 100k, I don’t have to pay the city tax. But I’d still have to file an annual statement.
One last thing I wanted to mention has to do with temporary selling in another state or city. LA specifically says you don’t need to register if you are:
A business with a physical presence in the City of Los Angeles limited to six or less days per calendar year.
So if you’re traveling to LA for a convention or tradeshow, you can sell your product without registering.