Ai, an internationally renowned artist detained for three months last year after making remarks critical of the government, was barred from the court where the ruling was announced.
"Today's verdict means that after 60 years of the founding of our nation, we still lack the basic legal procedures, the truth is not respected, and they do not give taxpayers or citizens any rights to defend oneself," Ai told reporters at his studio. "The whole legal system is in a dark state
His lawyer Pu Zhiqiang said the court ruled that authorities used legal procedures in their case against Ai's design company, Beijing Fake Cultural Development Ltd. Pu said the ruling was made "totally without reason."
Security was heavy outside the Chaoyang District Court. Plainclothes and uniformed police were blocking roads and forcing reporters and diplomats to leave the area.
Shortly after Ai's release from detention last year, the Beijing tax bureau ordered Beijing Fake Cultural Development to pay 15 million yuan ($2.4 million) in back taxes and fines.
State media said Ai confessed to tax evasion beforehis release, but activists interpreted the penalty as punishment for his criticism of the authoritarian government. Chinese authorities have tried to silence other critics by accusing them of tax violations or other nonpolitical crimes.
The company filed a lawsuit accusing the tax bureau of violating laws in handling witnesses, evidence and company accounts in the case.
Ai's wife, Lu Qing, the legal representative of Beijing Fake Cultural Development, was allowed into the court along with Pu and another lawyer.
Pu said the company will appeal the court's decision.
"We have lost this lawsuit but we believe that our action in reality can serve as a symbol of the awakening of civil consciousness," Pu said. "We do not recognize the legality of the ruling."
About a dozen supporters gathered at a nearby intersection while they waited for the verdict. Du Yanlin, a tax lawyer who advises Ai, wore a gray T-shirt with the artist's name printed on it in bold characters and was prevented by police from getting close to the courthouse.
Du said the court's ruling came as no surprise.
"Through this lawsuit we can clearly recognize what condition the Chinese judicial system is in. We can more clearly understand what Ai Weiwei's situation is," Du said. "He still has no freedom. He still can't have justice."
Since he emerged from detention last year, Ai has been refused permission to travel and is under constant surveillance. He still frequently criticizes the government on Twitter, which is blocked in China but accessible to tech-savvy citizens.
A sculptor, photographer and installation artist, Ai has increasingly used his art and online profile to draw attention to injustices in Chinese society and the need for greater transparency and rule of law.
Before his own detention last April, he was using Twitter to publicize the disappearance of fellow activists in a widespread crackdown by the government.
He also has spoken out about a number of national scandals, including the deaths of students in shoddily built schools that collapsed during the 2008 Sichuan earthquake, children killed or sickened by tainted infant formula and a deadly high-rise fire in Shanghai that killed 58 people and was blamed on negligent workers and corrupt inspectors.
Gillian Wong can be reached at http://twitter.com/gillianwong