But city officials promised to deal with the company’s grievances before the end of this year.

Now, with the deadline looming and no sign of a solution, the company is one step closer to moving its headquarters from West Los Angeles to Culver City or Santa Monica to escape the tax.

“We need a decision relatively soon or we won’t be able to wait,” said Blythe Holden, Shopzilla’s general counsel. “We are nearing the end of a six-year (office lease) commitment and we are about to embark on another long-term commitment. We need to know that we won’t be in this predicament again.”

The battle between Shopzilla and the city is part of the fallout from the city’s decision to reclassify about 30 businesses that used to get an 80 percent tax discount under 1997 rules adopted to lure multimedia and Internet companies to the city. The tax discount remains in place, but routine audits in recent years led the city to reclassify some companies out of that category and into a much more expensive one, then bill them at higher rates and assess them for back taxes.

The city has nine categories for business taxes. New-media companies are charged $1.01 per $1,000 in gross receipts, the lowest rate. The companies that have been reclassified no longer enjoy that rate, but are now subject to the rate for professional services companies, $5.07 per gross receipts, the highest rate. The professional services category includes law firms and the like.

Executives at Shopzilla, which has appealed its tax bill, and other companies said they could move to Burbank, Glendale or Santa Monica to avoid the higher taxes, which are believed to be motivated by the city’s hunger for dollars during these difficult budget times.

Critics point out that if the city insists on charging higher rates, some of the companies are likely to move, perhaps resulting in a net loss – not a gain – in tax revenue for the city.

“The city can’t solve its budget problems on the back of business,” said Sam Garrison, vice president of public policy for the Los Angeles Area Chamber of Commerce, who’s been working closely with businesses on the issue. “Business will be the engine that will ultimately pull the city budget and our local economy out of this recession, and that’s why the chamber is partnering with city officials to end these disputes and reform our business tax code.”

City officials have been talking about doing something. But no concrete action has been taken and it’s unclear which direction the city is leaning.

However, Mayor Antonio Villaraigosa and City Councilmen Bill Rosendahl, Eric Garcetti and Greig Smith are trying to redraft the tax code to include a new classification for Internet companies. Villaraigosa is trying to halt efforts to collect retroactive taxes in specific cases.

The city’s Office of Finance is preparing an analysis of an Internet tax classification, including how it will impact the city’s tax revenue, for the council’s information.

Meanwhile, the companies want quick action so they won’t be charged the higher rate for their 2009 business tax. Also, some of them, including Shopzilla, have to make decisions about their office leases soon.