The curse of freelance

In which I write a nasty letter to San Diego’s Office of Small Business after they absurdly demanded back taxes and fees for my tiny amount of freelance writing income…

Dear Meredith Dibden Brown:

Yesterday, I received a letter from you (at the Office of Small Business) informing me that I had to register my “business” with the City of San Diego, pay a $34 yearly fee to be registered with the City, pay an unexplained $17 fee for “zoning,” and pay $250.84 in late fees for not having registered for the three years previously. I am writing to complain about the City’s unethical behavior and to demand that all late fees be removed from my bill.

As ridiculous as it is that I have to pay $34 so that I may be allowed to earn a couple thousand dollars a year as a freelance writer and editor – yes, I’m taxed before I even earn a dime — I understand that the City’s coffers are empty after decades of incompetence and mismanagement, and someone has to pay! Why not force the victims of said incompetence and mismanagement?

That said, never informing self-employed residents that they had to register with the City and then using that lack of knowledge as way to force them to accrue late fees for three years is a gross abuse of taxation power. It is unethical and unconscionable.

I have lived in San Diego for nearly four years. I have paid my California taxes every year. I have declared myself as self-employed each year. When I called your office and asked why I was only informed now that I was supposed to register in 2006, I was told it was because the City only bothered to look for the information now. So, I am paying $250.84 because the City could not be bothered to ask the State who was declaring themselves self-employed and then to cross-reference those names with the City’s registry and then to inform those un-registered persons in a timely fashion that they owed registration fees. I am paying late fees because the City is incompetent in its collection of taxes.

Speaking of incompetence, the letter that you sent to me claims that San Diego Municipal Code §31.0110 “requires all business within its City limits to obtain a Business Tax Certificate.” This is not true. §31.0110 defines the terms of the code concerning Business Taxes. §31.0121 is the section of the code that “requires all business within its City limits to obtain a Business Tax Certificate.”

I would appreciate your swift response.

Sincerely,

Theodore K. Gideonse

Cc:
Councilmember Sherri Lightner
Mayor Jerry Sanders
City Attorney Jan Goldsmith

UPDATE: This blog post was twittered by none other than the local government editor of The San Diego Union-Tribune. He referenced Carl DeMaio’s opposition to the way the City is dealing with the tax, so I forwarded my letter to DeMaio. DeMaio wrote back within a couple days to say that he was hoping to create an amnesty program or make really small businesses, like mine, exempt. And: “You shouldn’t be fined for not knowing you need to register.” Lightner’s assistant wrote back to say they were looking into it.

I finally received an email back from the Office of Small Business last week. It was, to say the least, defensive. Here it is in its entirety:

Dear Mr. Gideonse:

Thank you for contacting the Office of the City Treasurer.

Section 31.0135 of the San Diego Municipal Code (SDMC) states:

The City Treasurer is not required to send a notice or bill to any person subject to the provisions of this Article, and the failure to send such notice or bill shall not affect the validity of any fee or penalty due hereunder, or the duty of such person to pay required taxes.

Hence, it is the business owner’s/independent contractor’s responsibility to register with the Office of the City Treasurer prior to commencing business. Since the Business Tax assessment is a self-reporting tax, the City is not required to send notification to new businesses stating the tax is due. However, the City does provide business owners helpful information pertaining to the Business Tax application process. This information is available at the Office of the City Treasurer downtown, the six Community Service Centers located throughout the City, and the Office of Small Business which offers business start-up seminars, including information regarding the Business Tax certification process. In addition, IRS instructions to the Schedule C inform taxpayers of the potential tax liability. The fourth paragraph of the Schedule C instructions (see attachment) state: You may be subject to state and local taxes and other requirements such as business licenses and fees. Check with your state and local governments for more information.

Section 31.0131 of the SDMC also states the City can bill retroactively for up to three years with penalties for each year that the business was in operation. In addition to the penalties for delinquent payment, all small businesses (12 employees or less) that do not register or pay their taxes pay a non-compliance surcharge of $68.00, while large businesses (13 or more employees) pay $250.00. Note: Your account was not assessed the $68.00 surcharge.

All that considered, in order to more accurately assess whether you have a tax liability with the City, please address the following questions.

1. For how long have you been filing Form Schedule C – Profit or Loss From Business? Please specify year.

2. How often do you perform these freelance writing services within the City of San Diego on an annual basis? Please specify the average number of hours accrued annually?

3. Will you be filing Form Schedule C for the 2008 & 2009 tax years to report similar activities performed within the city limits of San Diego?

I look forward to your reply so I may assist you further.

Regards,

John R. Zurita
Business Tax Compliance Supervisor
Office of the City Treasurer
The City of San Diego
(619) 615-1516 (Phone)
(619) 533-3274 (Fax)

There are so many problems with Zurita’s letter, most glaring being its “you don’t know what you’re talking about, you stupid taxpayer” tone. This is how I responded:

Dear Mr. Zurita,

Thank you for your email.

As my email clearly shows, I have read the municipal code. I am well aware that your office did not break the law. But your reliance on the vague fine print of the Schedule C form is a rather disingenuous way of claiming that we were told of the law when we were clearly not. I have also read Lambert v. California, 355 U.S. 225 (1957), and your office should, too, since it states that punishing someone for the lack of knowledge of a municipal law for which knowledge of cannot reasonably be expected is a violation of the 14th Amendment. [Thanks, Jeff! –Ed.]

If your office actually wanted taxpayers to know about the law, it would have made sure that California tax forms clearly stated the law and it would have made sure that tax preparation software programs all collected the tax. But it did not. And the most popular, TurboTax, which I use, is made by a San Diego company, Intuit!

The law is written in such a way, and it is enforced in such a way, as to create the nonpayment of taxes in order for late fees to be accrued. So, I stand by my assertion that the tax collection behavior of your office is unethical and an abuse of taxation power.

That said, here are my answers to your questions:

1. For how long have you been filing Form Schedule C – Profit or Loss From Business? Please specify year.

I have been filing a Schedule C since 1997.

2. How often do you perform these freelance writing services within the City of San Diego on an annual basis? Please specify the average number of hours accrued annually?

Since I moved to San Diego, I have never spent more than 20 to 30 hours a year writing, editing, or teaching writing on a freelance basis. I am a full-time graduate student, and rarely make more than $20,000 a year. The only year that I made a profit from my 1099s was 2006, when I received $xxx in royalties for work done in previous years. For that year, my net profit was $xxx. In 2007, my net loss was $xxx. In 2008, my net loss was $xxx.

3. Will you be filing Form Schedule C for the 2008 & 2009 tax years to report similar activities performed within the city limits of San Diego?

Yes.

Sincerely,

Ted Gideonse

I do not expect the City to voluntarily do the right thing. I can only hope that DeMaio is able to change the policy.

UPDATE #2: I win! I win!

Dear Mr. Gideonse:

Based on the information you have provided, you do not have a tax liability with the City. Since you have stated that you have never spent more than 20-30 hours per year providing these services, you qualified for an exemption under SDMC § 31.0202 (Exceptions — Limited Duration Activities). Therefore, we have canceled Notice Number – B2009006659.

In an effort to increase Business Tax Compliance, the City of San Diego recently began utilizing data from the State Franchise Tax Board (FTB). The City presumes that a taxpayer is conducting business within its jurisdiction if the taxpayer filed a business return/form with the Franchise Tax Board and or Internal Revenue Service using a City of San Diego address. This data is an effective means for tax enforcement and is used by a majority of California municipalities. However, there are situations that arise where an income tax filer does not qualify as a business.

We apologize for any inconvenience caused by the receipt of the Notice of Tax Liability billing statement.

Should you have further questions, please feel free to contact me.

Regards,

John R. Zurita

And by the way, he cc-ed the email to Lightner’s assistant. Ha.

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47 comments

Great letter! I agree, it’ ridiculous you should have to pay for an error they committed. Shame on them for their atrocious behavior!

I’ll be interested to see what kind of response you get. As a general rule, “Ignorantia juris non excusat,” ignorance of the law excuses no one. Related jurisprudence really only applies to criminal contexts, however. In Lambert v. California, 355 U.S. 225 (1957)) the US Supreme Court held that you can’t convict someone for failure to comply with a city ordinance (in that case, requiring registration for felons) of which they were unaware. My guess, however, is that, since here they are just charging you more money, rather than convicting you of a crime, your outrage, though totally reasonable in social/moral context, may not have much in the way of legal support. Oh and it may not have helped to call her incompetent if you want her to consider removing the late fees, but i imagine that was a calculated decision 🙂

I have definitely thought about ignorance of the law in this particular matter. When it comes to criminal proceedings, it makes sense. But this is local tax policy. What they did is like giving someone a parking ticket three years after the person parked in an illegal space that was not marked as illegal. I may be legally liable — I’d prolly lose in court — but this is not the IRS. This is San Diego’s profoundly incompetent Treasurer. And this is a political and policy matter, which is why I made a point to cc my letter to my councilmember. Pointing out incompetence here is fun and necessary! If you’re sending out a few thousand letters based on municipal law, then you should the law right. I mean, really. —Ed.

Dear Theodore,

I got the same letter! The city is claiming I owe them almost $175 for a business tax license fee and I’ve NEVER owned a business in my life. They claim the 1099 income I received from 2005-2007 generated a schedule C (which it does) and that puts me in the category of being a self-employed business owner. This is crap! I’ve been 1099’d plenty of times in previous years without having to pay a business tax liciense fee. What the heck is going on? I’ve called Meredith Dibden Brown personally as I know her, and she has not returned my call. Is it time to contact “The Turko Files”?

Signed mad as hell in Normal Heights

Turko! Yes! I contacted the mayor and the city attorney, and I haven’t heard back. I did, however, gets emails back from Sherri Lightner’s office and from Carl DeMaio himself. DeMaio is on our side. Email him through the city’s website. He needs ammo against all this! —Ed.

Update: I spoke to Meredith Dibden Brown today and here’s the latest: The City of San San Diego has never had access to the Franchise Tax Board in regards to people’s state tax returns until now. Apparently it is the law that anyone who receives income on Form 1099 is required to have a business license. Therefore the city is trying to play catch-up (it seems) with all the folks who fall into this category. I imagine the city has been flooded with phone calls, as many employers do not hire people on a W-2, but rather pay them through 1099 income; which technically makes them self-employed. This is all according to what I’ve heard. It does not mean that I agree with it! Meredith claims the city is trying to “gently educate” the public about this policy. In the meantime I heard from John Zurita who works for the city in the business tax compliance department and he has agreed to schedule an appeals hearing for me within 2 weeks. He said the monies due would not accrue any extra fees or penalties during that time. Have you called John Zurita yet? He seems willing to help.

Marty M.
Normal Heights

I got this same letter. This blog was my first result in a Google search for the municipal code. I am encouraged to know that I’m not the only one in San Diego being treated this way. I do a little web site development on the side and I’m paid with a 1099. The city has never said anything about having to pay this ridiculous tax that “helps fund the many business assistance activities supported by the City.” Oh really?! And what are you with this money?

Anyway, I’m going to fight too. If I have to pay some tax because I got paid by 1099, then I’ll figure out how to not be paid with a 1099. I don’t earn enough money to get it taken away through taxes and LATE FEEs. I don’t think assessing late fees is a good way to “gently educate” the public.

Keep up the fight and keep us all posted.

Will do! I just added an update… —Ed.

I just read the exceptions

http://docs.sandiego.gov/municode/MuniCodeChapter03/Ch03Art01Division02.pdf

I wonder what they mean by 6 days? Is that 6 days x 8 hours per day = 48 totals hours for the day?

I am writing my letter to the office right now saying I haven’t worked enough hours. Thanks for keeping this posting up to date. I am getting the word out about this.

My pleasure! If we all complain enough, they should eventually realize they’re handling it pretty badly. —Ed.

Another similar story here. In our case they even billed us for tme when we didn’t live in San Diego. A $340 bill became a $120 bill after four emails which became a $85 bill after five emails to John Zurita.

Similar story my wife was paid by 1099 but wasn’t really an independent contractor so I think there are no grounds to pay the tax.

In emailing Zurita some interesting ideas came about. First, Zurita doesn’t understand the difference between the word presumption and determination. Even if the city can use the 1099 filing to ‘presume’ it is a business, it has no rights to ‘determine’ that we had a business. By sending a bill they are effectively making a determination which I think is illegal. This false determination now requires us to invest our time and effort in correcting their error (which in our case went so far as to misrepresent domicile).

To me it is clear that they just send it out en masse and hope the few hundred dollars are small change to people so that they pay it.

But the other issue I have is how indistinguishable what a 1099 independent contractor is from a W2 employee (in no way implying my wife is a 1099 contractor). Given that the city offers no additional services to that independent contractor an additional tax strikes me as a violation of equal protection.

In my case since they were willing to go so far as to bill us when we didn’t even live in San Diego and then only correct their error after 3 hours of work, I am now planning to seek damages in small claims court.

I wonder if we don’t have grounds for a class action law suit here?

I don’t know the law very well, but considering the very shoddy way this was handled, they most likely have collected money they had no right to collect. It would be fun to sue them! I love suing people. Well, sometimes. —Ed.

Thank you for this vey useful post because the same thing happened to me. I received the same letter from the city of San Diego But you have given me the ammunition I needed to fight with. Below is the email I sent them. I will keep you posted on what happens next 🙂

Dear Meredith Bidden Brown
 
This is in regards to the letter I received from your office referenced herein by # 352890, which is dated April 30, 2009, postmarked May 22, 2009 and received May 27, 2009. This would not be a problem – I understand things sometimes move kind of slow in the city Government – if it were not for the section that states that I have 30 days from the date of said letter to complete and return the attached application in order to avoid the assessment of a non compliance surcharge…  You will have to agree, to say the least, that something is wrong with this picture, when 30 days become 3.
 
First and foremost and to make this very easy for the both of us, le me make it perfectly clear that what you are referring to as a business for the year 2006 and part of 2007 was respectively selling my dvd collection on ebay (at a loss I might add) and a freelance translation job on which I didn’t spend more than 20 – 30 hours a year; in which case under SDMC § 31.0202 is a limited duration activity and therefore doesn’t qualify as a business.
 
Second I moved from San Diego to Dallas TX in 2007 and have not resided or done business in San Diego since then. It is ironic that even though you had no trouble getting this letter to me to my current address in TX, you could not figure that out and went ahead and assessed Business Taxes, Late fees, Zoning fees and processing fees for the Years 2006 – 2007 – 2008 and 2009 for a Grand Total of $ 301.84
 
I’m trying to remain open minded about this but any which way I look at it, it does seem that this is a mere effort to deliberately enforce a law in a deceptive way that is neither fair nor just where the only emphasis reflected is on the accrual of a multitude of fees. However, I am prepared to give the city treasurer’s office in san Diego the benefit of the doubt and overlook all the many discrepancies and inadequacies if this mistake is promptly corrected and this notice is cancelled immediately.
 
Thank you for your prompt attention to this matter.
 
Regards
 
Sam

This is the response I got today from the city of San Diego. Thank you again for most valuable post… You guys have a great help in solving the problem.

Cheers…

Sam

Thank you for contacting the Office of the City Treasurer.
Based on the information you have provided, you do not have a tax liability with the City.  Therefore, we have canceled Ref. #352890. Your confirmation (cancellation) number is #B2009013722. 
In an effort to increase Business Tax Compliance, the City of San Diego recently began utilizing data from the State Franchise Tax Board (FTB).  The City presumes that a taxpayer is conducting business within its jurisdiction if the taxpayer filed a business return/form with the Franchise Tax Board and or Internal Revenue Service using a City of San Diego address.  This data is an effective means for tax enforcement and is used by a majority of California municipalities.  However, there are situations that arise where an income tax filer does not qualify as a business.
We apologize for any inconvenience caused by the receipt of the Notice of Tax Liability billing statement.
Should you have further questions, please feel free to contact me.
Regards,
John R. Zurita
Business Tax Compliance Supervisor
Office of the City Treasurer
The City of San Diego
Email: JZurita@sandiego.gov
(619) 615-1516 (Direct)
(619) 533-3274 (Fax)

Congrats! You’d think they could have figured this out BEFORE sending us bills for hundreds of dollars. –Ed.

[…] But take a look at this and read the whole way through. (The link comes courtesy of Nathan Gibbs through the power of Twitter). This blogger does a good job of arguing his case and has uncovered an exception that might help some writers. Posted in Bureaucracy, Local News, Media. Tags: Freelance, small business. 9 Comments » […]

Congratulations and thank you! I’m a freelance writer for San Diego Citybeat and work 30 hours a year, tops. I’ve been awiting my notice and cannot tell you how much I appreciate what you’ve done for the rest of us. Really. Thank you for sharing. (Came to you via Nathan Gibbs on Facebook.)

My pleasure! Good luck with them. (And I wondering where all of the traffic was coming from!) —Ed.
 

Thank you Mr. Gideonse for your follow through.

Is there any truth to the rumour that this will only be a factor if you write off your home office on your taxes?

I’m not sure if it’s a Schedule C or a 1099. Ask them. —Ed.

Hi,
I came across your page doing some research as I got hit up by the SD Treasury for my “business” activities for the 2006 year.  Prior to reading your story I got a letter saying I owed $300 but after answering their questions I got it reduced to $80.  But I don’t want to pay them anything because I didn’t even clear $6000 for my 1099 work.
I’m preparing another letter, and realize that my first was pretty vague about what I did mainly because I thought they knew what I reported etc etc.  Any advice?

I think overwhelming them with details is the best way to go. —Ed.
 

Ed,
I won and got off the hook.  I wrote in detail how my income was small enough to be irrelevant and how much I worked.  Then for safe measure I through in Councilman DeMaio and actually wrote to him the day before I got the good news.
Thanks for your help!!
Fight The Power!!!
 

Hi there.  I got one of these letters as well so did some research online and found this page.  Good stuff.
Im a musician and play out maybe 3-4 times a year.  So thats less than 4 hours of “work” in a year.
I called the number on the letter 619-615-1500 and told the person this information.  I explained that I should be exempt under SDMC § 31.0202.  They then said it shouldnt be a problem…just needed to provide my Schedule C forms from the years in question.
Ill keep you posted…once i send them in

I work full time on my art business.  I make very little money each year.  I am almost always in the red.  Like many of you, this extra tax seems quite unfair.  The due dates for it vary each year.  This year I was out of town for about four weeks when the “bill/reminder” came.  At the end of this past January I looked at my tax letters and receipts and saw that I was about one week late on paying this fee.  I sent it in promptly at that point and ignored the late fee reminder/bill that I got of $25.  I checked with the office to see that they received the bill after I got another one.  They absolutely refused to remove the late fee.   The dates for when this bill is due seems to vary year to year.  In 2008 it was due in March. Last year, 2009, it was due in November?? This year for 2010 it is due on January 20th.  How am I supposed to know and plan this.  It makes sense for these to be due around the same time as taxes or in June, or any time, but to be consistent.  How can anyone plan? Aside from the fact that artists who do not earn very much money should even pay this tax, the main problem is this department’s “gotcha” attitude.  Their interpersonal skills and their management seem to exist to ensnare us.  Also, what is this tax for? Most taxes have a reason attached to them. What services do we get out of it?
At this point, I am going to humbly throw myself on the Zurita court and try to get the $25 waived.  I sent in the fine amount already, but want to continue to pressure them.  It all seems like gratuitous cruelty, and a big waste of time.
Thanks or letting me vent,
Doris Bittar

I just got the same letter (5/20/2010), saying I owed back taxes and penalties from 2007, which is a convenient 3 years back, so their claim that they “just started getting a feed from the CA FTB” is total horseshit. This is totally shady of them to do, intentionally waiting 3 years to sock me with penalties. Then the government wonders why people hate them and distrust them.
I’m already paying the stupid rental unit tax plus 12K a year in property taxes. Anyhoo, I too fall under the Limited Duration exception so I’m going to march down there tomorrow with my schedule Cs in hand and give them a piece of my mind.
Thanks for the post, you saved me 276 wing wangs.

In my case they even billed us for tme when we didn’t live in San Diego. A $500 bill became a $200 bill after four emails which became a $90 bill after five emails to John Zurita.

1099’s are also issued by brokerages, so if you own stocks or bonds that issue dividends, interest or royalties (such as energy trusts), then you get one…either 1099-B, 1099-INT, 1099-DIV, 1099-MISC.
You may have been totally unemployed and made no money from ANY form of service or business, but will still get a 1099 from brokerages.
Allowing 1099’s to trigger these notices is not a good idea at all.
 

There are certain responsibilities that come with being a small business owner, one of those is to become familiar with the requirements of the place where you will conduct business.
The City of San Diego has a page dedicated to “Business” on their website http://www.sandiego.gov/directories/business.shtml, in the sidebar, there is a link to a PDF document entitled “10 Key Steps to Starting a Business”. Documents such as this are not unique to San Diego, many municipalities have them, they are designed as references and checklists for key steps that should be considered if doing business with the City.
If you plan to do business in an unincorporated area, check with the County – SD County actually has a list of Cities that do not require business licenses: http://www.sdcounty.ca.gov/cs/businesslicenses.html.
I presently maintain active business licenses in 6 cities, and have a standard practice of researching the permit, licensing and code requirements unique to my business before accepting work in a new city, it’s just one of my many responsibilities as a business owner. I don’t expect someone to spoon feed me that information unless I’ve specifically hired them as a consultant for that purpose.
Aside from that, as is often and sadly the case, the level of customer service provided by employees in any bureaucracy is pretty pathetic. Understand that this is a broad generalization and there are many helpful folks out there, but there are too many that are little more then drones following the script they’ve been provided. Whether by choice or design, they are not empowered to be helpful. Good customer service doesn’t happen by accident, it takes work from all concerned.

Dale Hill
Pops’ Pedicabs
http://www.popspedicabs.com
 

ONCE AGAIN, these people, for the most part, were not running businesses; therefore, they did not look at such material. Don’t pin the blame on the victims here.


Mr. Gideonse,
I would like to thank you for your blog; with the information you and others provided the city finally agreed to cancel my tax liability. The method the city is using to collect this tax is very unethical and a complete abuse of their taxation powers.  Also from what I read so far, it seems the city is only sending letters to city residents who are at least three years in violation. I would like to know if anyone has every received a similar letter when only one year out of compliance?
Thanks again!

I just received the same letter asking for 3 years’ business tax and late fees totaling $277.  I received the letter despite the fact that I have never owned a business and did not file any schedule Cs.  I don’t know what triggered them to send me the letter.  I did have some 1099s due to dividends and interest received from owning stocks and bank deposits.  But I can’t believe they used 1099 forms as the trigger since most people put money in the bank and receive interest and therefore get 1099 forms.  I called them and told them I did not own a business and they canceled the tax.  They may be sending this letter to a lot of taxpayers and hope that some of them would just pay the tax without asking questions.  I agree that the way they are collecting this tax is unethical and an abuse of taxation power.

Just got the same notice, from a 2008 tax return; just like everyone else, 3 years worth of penalties.  Should qualify under the limited use exemption.  Thank you so much for posting this information!
And here I thought San Diego was a ‘nice’ place to live.  😛

I just received the same letter.  I helped somebody with drafting services for a week 3 years ago.  This is insane.  I cant believe it is still going on two years later.  Has anybody contacted Turko?  This is so unethical and immoral.  I cannot believe that there hasn’t been more of a stink about this.  Thanks for all the information.  I will now have to spend MY time to fight this, due to their unethical behavior.

Dear Mr. Gideonse,
 I would like to express my appreciation for your information on the San Diego Business Tax.
  I recently received a notice indicating I owed $277.00 in back fees and penalties beginning in 2008. Interestingly, I resided in Japan 2005~2009. However, I contacted the Business Tax Compliance section and very politely related that I was a semi-retired academic and the only monies I received that could be related to “business” income were royalties and honorariums from academic publications and presentations.  The Compliance section representative informed me that royalties and honorariums were exempt. My “tax liability” was subsequently cancelled.
 Relating to this matter, it is also worthwhile to note that California Business & Professions Code §16102 exempts honorably discharged veterans, as specified below.
 Every soldier, sailor or marine of the United States who has received an honorable discharge or a release from active duty under honorable conditions from such service may hawk, peddle and vend any goods, wares or merchandise owned by him, except spirituous, malt, vinous or other intoxicating liquor, without payment of any license, tax or fee whatsoever, whether municipal, county or State, and the board of supervisors shall issue to such soldier, sailor or marine, without cost, a license therefor.
 Again, thank you for taking the effort to promulgate your experience so others can befit.
 Good luck with your studies. There is life after the dissertation.
 Ed McDaniel, Ph.D.

Yes, I got the same letter recently.  So are all the letters for 3 years worth of fees and penalties?  Seems like they are waiting until they can send out a bill for 3 years worth, since that is the maximum time they can bill for the taxes and penalties, and it maximizes the amount due.  I’m studying what’s on the web, etc…, so thanks for the information.
One would think the levy of a tax without notification is somehow not legal, or at least unethical.  Who passed these codes/laws?
 
 

I just received one and the 3 year wait for the late fees to add up hold true here. Thanks for the blog.

This is going to sound eerily similar to everyone else’s posts, but I just got – you guessed it – the SAME letter. Mine states that I owe $344.84 (including initial tax, late fee, zoning fee and surcharge) in business taxes dating back to – yep, you guessed it again – 2008. I called the BTC today and spoke to someone who was very unhelpful and behaved as though she gets angry phone calls on a daily basis (and I’m sure she does).

Essentially, I need to get my hands on my 2008 tax return transcript so I can call her back with the specific information, only to have her tell me (I’m sure) that I still owe all of the money they’re claiming I owe. I, too, had received a 1099-MISC for that tax year (for about $650-700 of filing and miscellaneous office work that I did for a friend who IS a small business owner). I wanted to be a good citizen by ensuring I reported ALL income, even though the aforementioned amount was so small it did occur to me to ignore the 1099. Of course, that’s not the kind of person I am. Now I’m being punished for being an honest person. Bottom line: the city is trying to scam me out of money I really don’t have for something that I really didn’t know anything about – my supposed business.

I’ve seen a couple of comments about contacting Turko. Has anyone actually done so? Because I’m seriously considering it. I just don’t want to if someone else has already attempted to get him to back this case and been unsuccessful for some reason. Also, have the letters to De Maio proved successful? I’m very concerned about this entire situation. This is no way to treat ordinary, hard-working citizens.

Thanks for the blog post.
I received the same letter a few days ago. The letter is so obnoxious, I knew if I searched Google, I would find others complaining.  The letter basically says: you owe us money, and we’re gonna send you a bill with penalties added if you don’t cough up.  The letter does not say what constitutes a “business” subject to this tax and what exemptions there may be, nor does it refer you to a website or other user-friendly resource to help determine if you are subject to the tax.  For example, I work well under 6 days a year (actually just a few hours per year) doing consulting (in addition to my full-time job).  Why send me a letter saying that I owe the money when in truth, as far as they know, I *may* (or may not) owe the money. This is deceptive, as if they are trying to extract the funds from me and obfuscating the fact that in truth that they do not have enough information to determine if I indeed am even subject to the tax.  After clicking around for a while on the City’s website, I discovered that work under 6 days per year is exempt in any case.  So, contrary to what was clearly stated in the letter, I do not owe money.  If I had not taken it upon myself to do this, I would have simply believed the letter–which informed me I owed the tax and was going to be billed–without ever realizing there were various exemptions and other considerations helping to determine who has to pay and who doesn’t.

Just received a lovely letter as well. I had heard about this 2 years ago when it happened to a friend, so luckily I had done my research then to prepare myself. I had bookmarked your blog for the day that I got my love letter from Meredith Dibden Brown. Sure enough, it came today. With the help of you all, I composed a sound letter that I plan on sending out via email tonight. I will keep you posted as to what the results are.

just got the same letter, and I haven’t lived in San Diego for nearly 2 years now. It’s for work I did as a clerk and made less than $1000 on. Any more information on how to fight this, or is sending a letter the best way? I’ve exchanged some emails with a tax agent but she only insists that I send her my Schedule C so that she can look for exemptions. Neither of those things are going to happen.

This information was very helpful. I was under a similar situation with a charge of $200. I sent them an email stating my exemption status under SDMC § 31.0202 (Exceptions — Limited Duration Activities).

My notice was cancelled the same day after few emails discussing my situation. @ted, thanks for saving me some money.

I wish I found this out, earlier. I don’t even think I make enough to pay the business taxes each year, but they said if I make any income at all in the city of San Diego, I have to have a business certificate. I do this as a hobby only. I’m not even considered a business according to IRS standards and I’ve only gotten one 1099-MISC my entire life. I usually report it as hobby income because that’s what it is. However, one time I had to get a seller’s permit for a local art show and they said that automatically made me a business. I didn’t even use it or go to that art show, but I had to pay back penalties. Now, I pay the yearly permit fee whether or not I am earning money or not, just in case I get a chunk of money that requires me to file a schedule C.

Yes, I also received a love letter from the city. In my case, I had worked for a company that erroneously and illegally classified me as an “independent contractor,” though I met NONE of the criteria for such a status. They did this in order to avoid paying payroll taxes. I was forced to file a Schedule C in order to avoid the 40 PERCENT tax rate assessed on “private contractors” after expenses. So now I have to show the city that I never was a business. Businesses have IRS tax ID numbers and names, etc. One is not a business simply because he or she receives a 1099. If I fly on an airplane, that doesn’t make me a pilot!

If the city wants to suck the life marrow out of someone, why don’t they go after the real businesses that engage in this kind of trickery? There are many of them out there.

Perhaps the flagrant injustice demonstrated by these posts should serve as a catalyst for a more wide-sweeping political push to end, once and for all, these corrupt practices. In addition, perhaps we should all send the city invoices for the UNPAID labor we are forced to do in our effort to prove a negative.

You wouldn’t allow my post?? Who are you working for?

Myself. Perhaps you should learn some patience.

Thanks. I’ll try to improve myself.

Going to the “zurita court” today-has anyone been there and won? any advice

Ken, how did “Zurita” court go? After numerous emails, I am left with that as my only option now (well, aside from a lawyer, which I honestly might pursue). Curious to know how it went, and what might help going in?

I got a letter yesterday. Saw your website and it explained a lot. I sent the following letter to the city treasury and CC’d Carl Demaio.

Dear Collections/Treasury Department,

Yesterday, I received a letter from you (at the Office of Small Business) informing me that I had pay a $34 yearly fee to be registered with the City and pay $550.13 in fees most of which I can only assume are late/zoning/processing/collections fees for not having registered for the three years previously. This letter seems to have been generated from 1099 income I reported in 2010. I understand the City is able to retroactively asses the tax 3 years after the fact. The letter also included significantly threatening language that if I did not respond that my credit will be destroyed and that my account is in collection.

I called the office and was told I need to submit Schedule C reports for the tax years 2005,2009,2010, and 2011. This is outrageous especially due to the fact that my profession falls under a clear exemption to this tax. I am a licensed Insurance agent working for XXXXX and have been since 2006. I cut and pasted from your website below. This information can be verified by doing a simple check at:

http://www.insurance.ca.gov/license-status/
Insurance License Number: XXXXXXX

“Insurance Broker-Agents
Any broker-agent acting as an agent for an insurance provider is exempt from paying the business tax assessment. These are “agents” appointed by insurance companies to represent the insurance company and to sell their products. To be an “agent” the insurer is required by law to file an appointment document known as a “Notice of Agency Appointment” with the California Insurance Commissioner’s Office.
The agent exemption is applicable to the agency activity. If the appointed agent is engaged in other business activities, such as court service, estate planning, etc, the agent is not exempt from paying the business tax assessment on those activities. Since the City of San Diego does not collect business tax revenue based on gross receipts, if any part of an insurance business derives revenues in a capacity other than an agency relationship with an insurer, the business is subject to the business tax.”

I request that this notice be cancelled immediately and I would appreciate a swift response.

Sincerely,
Robert

Love the post, and to agree with you, the city definitely does wait until the 11th hour for the sole purpose of extorting the extra fees. My bill is $261.41 that arrived last night and includes late fees, zoning fee, non compliance surcharge (wtf), SB 1186 Fee. The only thing more funny than this is that it includes the $34 business tax fee for 2015 when I closed the business (and filed with state) on Jan. 1st. I don’t have an excuse as good as some of the others, I just never realized this tax existed… and I do the accounting for my current out of state corporation!

Received the same letter; Wishing I did the research before giving in and paying (with money I had to borrow) the total amount including late fees!

Also included was a “Business Tax Application”, which is next to impossible for me to complete as the information requested pertains to not me, but to my non-existent business. Looking for some guidance here since I plan to continue earning (and relying on) substantial “non-employee” 10-99 income next year!

Thanks!

I will start with, I am not a lawyer or CPA, if you need an absolute “correct” answer, talk to them. As for free advice, I would want to start with what you mean by “non-existent” business. Did you shut it down? Did you feel it was never an actual business? I would think San Diego found you due to some 1099 filing to Cali. As for the money, if you have already paid all the fees and penalties, $34 is much more reasonable to come up with. I did not have to do the business tax app as I dissolved my LLC at the beginning of the year. When I complained and told San Diego I will pay, but I will not pay for 2015 or this “zoning fee” because there is no reason a dissolved corporation needs to be approved for future zoning, San Diego wrote me back and said I do not need to pay any of the taxes. Taxes are dependent on type of business, such as resale, service, …

I received $100 of late fees for my rental unit business tax. I never received the 1st or 2nd notices even though the mailing address and rental unit address are correctly printed on the 3rd and final notice (which I did receive). The 3rd and final notice had the $100 in late fees. I called and tried to get the fees waived. I think I will just give in and pay for it. I was told that I should just know to pay the rental unit business tax each year. What a joke!

Awesome writeup. Got my letter yesterday and luckily i came across this page and figured I am eligible for exception because of limited duration (I was almost about to pay the bill). I wonder how many people paid without reading the municipal code. This should be ripe for class action lawsuit.

In this day and age where we are used to constantly being scammed by various entities, our local government was the last place i expected this.

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