They do not work, they create.
That is the argument offered by some of Los Angeles’ home-based writers, authors and artists, who contend they should not be taxed on their work by the city in the same way as other home-based business people.
Their work is fundamentally different from that of accountants and computer consultants, they say, because it has First Amendment protection. Besides, both the State of California and other cities, such as West Hollywood, have given them special privileges.
And their arguments have garnered the attention of two members of the L.A. City Council Laura Chick and Michael Feuer. The two recently backed an effort to have the city study whether writers, authors and artists should have to pay L.A.’s costly gross receipts tax.
“We haven’t come to any conclusions as to the best way to approach this,” said Ken Bernstein, Chick’s planning deputy, “but we thought it was important to look at what other cities are doing.”
Chick and Feuer’s motion follows an earlier effort by Chick to legalize home-based businesses a move that was approved by the council last year and a successful effort last month to quash a requirement that newly legalized home-based businesses pay up to three years of back taxes.
The new motion asks the city administrative officer, the city clerk and the city legislative officer to prepare a report detailing how other cities tax their writers, authors and artists and what options there are for changing the L.A. tax on those professionals.
The motion is being considered by the council’s Budget and Finance Committee and is expected to come back to the full council within 60 days.
In the meantime, the Writers Guild of America has hired a lobbying firm and a lawyer to convince council members of their position.
“We feel very strongly that writers should not be required to take out a license to write in their home,” said Cheryl Rhoden, spokeswoman for the West Coast division of the Writers Guild. “We are very confident that the council will be open to hearing those concerns.”
Rhoden said last week that she is in the midst of calling other writers organizations to see if they’ll be doing lobbying work on the issue. The Writers Guild has also retained an attorney and hired Delphi Associates, a Venice-based lobbying group, she said.
Rhoden said a home-based television writer making up to $75,000 in a year would pay a base rate of $110.86 in city business taxes. The writer would pay an additional $1.48 for each additional $1,000 made in a year.
There’s a higher rate for film writers, who get charged a base tax of $106.43 for the first $18,000 in gross receipts, plus an additional $5.91 for each additional $1,000 made.
Thus, a film writer making $75,000 in a year would pay $443.30 in city business taxes.
As another example, a writer selling a made-for-TV movie script selling for a typical $200,000 would pay $295.86 in city business taxes.
Rhoden said there is precedent for not charging writers, authors and artists a city business license tax because other cities and the state treat creative professionals differently.
On a state level, writers are not required to pay sales tax on the sale of a manuscript because the manuscript is not considered the “true object” of the transaction. Rather, it is the story or ideas contained within the manuscript that is being sold.
Last year, the state Board of Equalization eliminated the requirement that illustrations by artists and comic strips by cartoonists both of which are considered the true object of transaction because of First Amendment issues and because the illustrations and comic strips often contain stories and ideas within them.
Some cities in the state such as West Hollywood in the L.A. area also do not require writers, authors and artists working out of their homes to pay business taxes.
In West Hollywood, writers, authors or artists are not required to pay business taxes unless they occupy a commercial location or decide to incorporate their businesses with the state.
In fact, most home-based professionals are exempt from paying city business taxes in West Hollywood, as long as they are a sole proprietorship, are not incorporated and obey neighborhood zoning laws. They are only required to pay a one-time $25 filing fee.
“For all intents and purposes, they’re exempt from the tax,” said Steven Saffier of the city’s revenue management division.
In the City of L.A., Chick and Feuer’s council motion is designed so that any consideration of a tax change for writers, authors and artists would coincide with a “tax equity” study, which is expected to reach the council this summer.
That study is expected to look at L.A.’s business license tax system as a whole to determine which types of businesses are paying too much in taxes, and which are paying too little.
“We don’t want to be in a situation where we do a tax equity study, do a major change, and then say, ‘What about this?'” said Howard Gantman, assistant chief deputy to Feuer.
Gary Mendoza, Mayor Richard Riordan’s deputy mayor for economic development, said it is important to develop a fair tax structure for L.A.’s writers and artists so that they are not so alienated they move to other cities.
“You need to be concerned about putting an undue tax burden on the creative talent in Los Angeles,” he said.
