As of Saturday, any business applying for a license and claiming the exemption will be required to provide specific information that will verify the business’s location as a residence and net earnings of less than $27,000 per year. Letters requesting verification are being sent to the more than 60,000 businesses already claiming the exemption, and businesses that do not respond will have their license status revoked.
“Our investigations indicate to us that there are an inordinate number of businesses claiming the home-based exemption, and many of them are nothing more than out-of-state shell companies,” Miller said in a press release. “We’ve either got a whole lot of people who are engaged in fraudulent filings and are lying about the nature of their business, or we do in fact have shell companies that serve little legitimate purpose in terms of commerce.”
In April, an audit of business license filings in the secretary of state’s office found that a significant number of businesses are falsely claiming they are exempt from paying the annual business license fee. The audit found the state will experience nearly $11 million in lost revenue in the next fiscal year due to the significant increase in the number of businesses that falsely claim the exemption. The law requires any person or entity that performs a service or engages in a trade for profit to obtain an annual state business license. Home-based businesses that currently make less than $27,000 a year in net earnings are exempt from the requirements, as are a very limited number of other types of business.
The secretary of state’s office also conducted its own investigation of a limited number of businesses and found none that properly claimed an exemption. The investigation found that 73 percent of the entities investigated falsely claimed the business license exemption. The rest of the entities did not respond to inquiries and their charters to do business in the state were revoked.
As of Saturday, the secretary of state will no longer accept online business license applications that claim a business license exemption. Such filings will require a completed notarized form that provides verifiable information of the home-based business, including the residential address and net earnings.