Businesses operating in the city of San Diego, California, must obtain a business tax certificate and pay the city business tax. San Diego Municipal Code § 31.0101, et seq. The law applies to any person engaging in a business activity within the city, including independent contractors, self-employed individuals, and businesses run out of homes or nontraditional locations. San Diego Municipal Code § 31.0301.

There are several types of exceptions to the business tax requirement: charitable organizations, service clubs, and similar exempt organizations all do not have to pay the tax. People engaging in a business activity otherwise subject to tax who do so for only 6 days in a calendar year also do not have to pay. Blind business owners do not have to pay the tax as well. San Diego Municipal Code §§ 31.0201-31.0204.

If a business employs a number of independent contractors or agents who work in San Diego, it may elect to reimburse its contractors for the business tax. These contractors or agents will not be liable for the tax if paid by their business. San Diego Municipal Code § 31.0301(b).

Unfortunately, often self-employed people and independent contractors are not aware of the San Diego city business tax requirements. Failure to obtain a business tax certificate could result in misdemeanor charges, and failure to pay back business taxes is grounds for a lawsuit by the city against the taxpayer. San Diego Municipal Code §§ 31.0121, 31.0122.

Like San Diego, other California cities have business tax laws designed to gather revenue for the cities from anyone doing business within their boundaries. These laws vary widely from city to city.

Seek legal advice to learn more about little-known state and local requirements that your business must follow. Michael Leonard, Esq., of San Diego Corporate Law, named a “Rising Star” for 2017 by SuperLawyers,, is an experienced business attorney familiar with San Diego-specific laws and how to comply. To schedule a consultation, e-mail San Diego Corporate Law or call Mr. Leonard at (858) 483-9200.