Most cities charge their businesses a license tax to operate in their city. But there are constitutional, statutory, and regulatory limits on how much they can charge. For example, a common issue is whether the business activity was actually done in the city. In many cases, business income is only partially attributable to activities within city limits. For example, if a retail business ships goods to customers who live out of state, the city should not charge license tax for such sales. Similarly, if a professional performs work outside of the city, the city should not charge license tax for the income derived from that work. If the city is charging the tax based on the total income of a business, it is very possible they are overtaxing. Our Firm has represented clients whose business license taxes were reduced after appeal by over 90% for this reason.
Similarly, most cities have different license tax rates based on the type of business that is being taxed. If the city misclassifies the business, the tax assessment may be increased by as much as 5-10 times. We have successfully appealed on this ground and obtained very substantial tax reductions.
There are many reasons why a business license tax assessment may be wrong. Each case is different. But it is critical to obtain representation and to file timely appeals if you believe your license taxes are too high.