May a taxpayer with a new business which may be subject to a “back tax” elect SCF at the time of renewal or must that taxpayer report gross receipts under the dormant classification?
A new business taxpayer (LAMC Section 21.30) will be subject to back tax if it files late or if taxable gross receipts exceed $500,000. The taxpayer may still elect SCF. If the taxpayer elects SCF, all gross receipts and taxes, which includes the back tax, will be reported under the primary gross receipts category. The taxpayer does not have to report the gross receipts and taxes that would have been owed under the dormant classification and is not subject to back tax under the dormant classification. The rules for the New Business Exemption (Section 21.30) should be applied prior to the rules for SCF. Example 1: In 2003, a new business taxpayer applies for both the Retail Sales (L167) and Professions & Occupations (L190) classifications. In 2003, the taxpayer had $120,000 in Retail Sales gross receipts and $30,000 in Professions & Occupations gross receipts. The taxpayer files a late renewal in April of 2004 and therefore does not qualify for the New Business Exemption in the second y
