It may be a little late for Christmas, but hundreds of businesses in L.A. County that may have been stiffed on refunds from state tax collectors could soon be collecting some tidy checks.

The windfalls are the result of a discovery by state Board of Equalization member Michelle Steel that the tax collecting agency has apparently been holding on to security deposits that should have been returned to some 600 businesses in her district, which stretches from Long Beach to San Diego.

Under the state’s tax code, retail businesses must get a collateralized seller’s permit from the board and post a security deposit if they don’t have real property as collateral. The size of the deposits range from $2,000 to $50,000 depending on the monthly sales receipts from the business.

The board is supposed to return the security deposits after three years, assuming the business has made all of its tax payments and is not under audit.

But shortly after winning election to the board, Steel who campaigned on a platform of reducing the state’s tax burden heard from a San Diego-area business that had not received its refund for more than two years after it was due.

Steel intervened on behalf of the business, expedited the refund and ordered a broader investigation. The tax agency announced last week its investigation found that it owed $39 million in total to thousands of state businesses. Steel is now demanding that the agency retrain staff and review its books monthly to prevent future delays.

“If a business is late in paying its taxes, it gets hit with an immediate 10 percent penalty and must also pay interest. But if the state is late in paying back these security deposits, nothing happens, so there’s no incentive to return the money,” said Steel spokesman John Hrabe, who added that many business owners don’t realize that the security deposit is refundable and therefore don’t contact the board.

Agency spokeswoman Anita Gore denied that the late payback of security deposits was intentional, but did acknowledge that “some people within the agency have not made this a top priority and it should be.”

Gore offered several explanations for the delays, including the possibility that many of the businesses were undergoing audits at the time the refunds were due. Any time a business is audited, the agency holds on to any money paid by that business, in case it must be applied to outstanding tax obligations. Also, she said, some businesses may have moved and not left a forwarding address with the agency.

Gore said that in response to Steel’s investigation and complaints from businesses, the Board of Equalization has increased its frequency of computer checks for refunds that may be due to businesses in Steel’s district.

“If this pilot program is effective, we may take it statewide,” she said.

The entire issue is expected to come to a head Feb. 1, when agency staff is to present a report to the five-member board.

In the meantime, Gore urged any business that paid a security deposit more than three years ago and has not received a refund to contact the Board of Equalization at (800) 400-7115.

More Good Tax News

Businesses in Los Angeles can look forward to another 4 percent cut in their business tax this year, city officials said recently.

Under provisions of the 2004 business tax reform package, the tax rates for businesses with more than $100,000 in annual gross receipts dropped another 4 percent effective Jan. 1, on top of similar drops each of the previous two years. Businesses with less than $100,000 in annual gross receipts are exempt and don’t pay any business tax to the city.

The cut couldn’t have come at a more opportune time for local businesses, which are being slammed by higher fuel and lease costs, and a slowing economy.

But it will also be the last 4 percent cut. Next year’s reduction can only be 3 percent as it represents the final portion of the 15 percent total tax rate cut agreed to in the reform. The actual size of the cut will depend on the total tax receipts from business.

More Chemical Regs?

In what may be a prelude to more regulations for chemicals in the workplace, two state agencies last month issued a report that attempts to assess the health risk of dozens of chemicals that currently have no workplace exposure limits set.

The state Office of Environmental Health Hazard Assessment and the Department of Health Services looked at 62 chemicals used in the workplace that are classified as carcinogens under California’s Proposition 65 hazardous chemical warning law but do not currently have “permissible exposure limits.”

Among these are such commonly used chemicals and agents as tetrachloroethlene (used in dry cleaning), diesel engine exhaust, vinyl fluoride, nickel and glass-wool fibers.

While the report itself is very technical, at least one lawmaker plans to use it as a guidepost for more regulation. Assembly Speaker pro-tempore Sally Lieber, D-Mountain View, is carrying a bill AB 515 that would require state agencies to develop permissible exposure limits for chemicals not currently regulated in the workplace. The California Manufacturers and Technology Association has expressed concern over the effort.

“Manufacturers are struggling to compete in the state because of other excessive regulations and production costs. For this reason it is important that data and research created to regulate industry even more be scientific based and thorough,” said association spokesman Gino diCaro.

Staff reporter Howard Fine can be reached at (323) 549-5225, ext. 227, or at

[email protected]

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