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Mayor Villaraigosa urges end to business tax on new car dealers

November 8, 2011 |  8:48 am

New car dealer business tax
At a news conference to announce that Beverly Hills Porsche will move to Los Angeles, Mayor Antonio Villaraigosa plans to call for an end to business taxes on new car dealers, hoping to lure more to the city.

The dealership is the second from Beverly Hills to come to Los Angeles. Villaraigosa's office also takes credit for drawing Beverly Hills BMW to the city, ending an unrelenting exodus of new car dealers that the mayor's office says saw 95 shut down in Los Angeles over the last 25 years.

Auto dealers are coveted by cities for the enormous amount of sales tax revenue they generate. Los Angeles has 52 dealers that sell new cars. In 2010, those dealers brought the city $29 million in sales tax revenue, but Villaraigosa said that they paid just $3.6 million in business taxes.

"For too long, L.A.'s business tax has driven auto dealers outside the city limits," the mayor said in a statement. "It's time to reform our business tax in a way that keeps auto dealers and the large amount of sales tax they produce inside the city of Los Angeles."

The mayor noted that his proposal comes ahead next week's annual auto show at the Convention Center. "Let's show them Los Angeles is open for their business," he said.

The proposal has the support of City Council President Eric Garcetti and Councilman Mitch Englander, who are expected to join him at the Beverly Hills Porsche dealership.

"It's time to stop surrounding cities from using L.A.'s broken tax system to lure businesses and jobs away from us. Targeting car dealers is a big first step," Garcetti said in a statement.

The mayor credited his business team with helping to persuade Beverly Hills Porsche to move by accelerating the permitting process. He said the luxury car dealer racked up $100 million in sales last year, which would mean about $1 million a year in sales tax revenue that would go toward the city's general fund. The mayor's office also said Beverly Hills BMW had $145 million in sales last year, which would mean about $1.45 million in sales tax revenue for Los Angeles if it hits that mark again.

Englander and Garcetti plan to press the council to pass a motion to eliminate the business tax for new auto dealers. The motion points out that, although the city has 10.7% of the state's population, it has just 3.7% of the auto dealerships. It also notes that the Greater Los Angeles New Car Dealers Assn. says that car dealers in Los Angeles employ 5,200 people and pay $640 million in wages and benefits.

The motion concludes: "Eliminating the gross receipts tax is a crucial incentive that can help bring new businesses to Los Angeles and help existing businesses stay and thrive, create jobs and breathe life into our economy. Eliminating the gross receipts tax for new car dealerships is the perfect first step because they generate so much sales tax revenue and jobs."

Charlie Gill of with the Greater Los Angeles New Car Dealers Assn. praised the proposal. "For the first time in generations," he said in a statement, "dealers would be unfettered by this punitive tax and feel free to move into the city, move their merchandise and use the money they save to hire new employees."

Garcetti has asked city officials for a report on how to end the city's reliance on the business tax. Most cities in the county have lower business taxes than Los Angeles and some have none. The mayor's office notes that the auto dealers association says the business tax led some auto showrooms to move out of L.A.


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Photo: Mayor Antonio Villaraigosa plans to call for an end to business taxes on new car dealers -- an announcement that comes a week before the city's annual auto show, pictured here in 2010. Credit: Allen J. Schaben / Los Angeles Times