According to the New York Daily News, the mogul, who is facing a $996,000 (£774,645) bill, is among the thousands of "people and companies" that collectively owe $1.9 billion to the city of New York.
Along with Diddy, hip-hop legend Doug E. Fresh, Mickey Rourke's plastic surgeon and rapper Remy Ma's defence lawyer are all accused of posting promotional work illegally.
Finance commissioner David Frankel said: "We are going to find these people. We're going to turn them upside down by their ankles and we're going to shake them until the money comes out of their pockets."
Earlier this month, Diddy revealed that he came up with the name of his latest group Dirty Money because he used to keep large amounts of bills in his pocket.