City leaders are exploring whether to expand the Los Angeles small business tax exemption, a move that could ease pressure on neighborhood restaurants and Latino-owned businesses.
“It’s a day-to-day battle. You could say I’m in survival mode. I’m holding on as much as I can, and I’ll keep doing so until the end. But the situation for us is very bad,” said Guzmán Toledo, owner of the Basil restaurant.
Like him, it is the story that repeats itself for small business owners.
Something could change, not suddenly but little by little…
The Los Angeles City Council on Tuesday directed city staff to explore raising the financial threshold for its small business tax exemption program, signaling a potential expansion of relief for local businesses.
In a 13–0 vote, council members instructed the Office of Finance, with support from the city’s chief legislative and administrative analysts, to evaluate the feasibility of increasing the exemption threshold and to assess the potential fiscal impact. The report will also compare how other cities structure and implement their business tax systems. Councilmembers John Lee and Traci Park were absent during the vote.
The program initially eliminated business taxes for companies with less than $5,000 in gross receipts. In 2005, the threshold was raised to $50,000 and increased again on July 1, 2006, to $100,000. During that period, the city also introduced a similar tax exemption for new businesses, although that initiative expired in January 2016.
Councilwoman Monica Rodriguez, who introduced the motion in December 2025, noted that the exemption program was created two decades ago and is due for reassessment.
“We want to advance thoughtful policies that expand this exemption and create more opportunity for small businesses,” Rodriguez said.
Under the city’s tax structure, businesses generally pay a set amount per $1,000 of taxable gross receipts, depending on classification. Some taxes are assessed at flat rates per tax period, while others are based on factors such as the number of employees, square footage, equipment used, seating capacity or total fees collected, according to Rodriguez’s motion.
Restaurants and other small businesses pay an average of $1.27 per $1,000 in gross receipts annually.
Although the city has adopted various incentives and exemptions over the years to support small and new businesses, several programs have expired or have not been updated to reflect current economic conditions.
Rodriguez acknowledged that discussions come amid ongoing concerns about the city’s general fund and broader fiscal challenges.
“We know what our challenges are with our general fund and our fiscal circumstances,” she said. “But we also have an obligation to ensure small businesses can effectively compete — especially when neighboring cities are creating more hospitable environments for businesses to open and grow.”
Separately, city staff are reviewing options to provide both routine and emergency assistance to Los Angeles restaurants, including additional support for legacy establishments facing financial hardship.
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