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HomeMy WebLinkAbout25-13 RESOLUTIONRESOLUTION NO.25-13 A RESOLUTION STATING THE SUPPORT OF THE CITY OF FAYETTEVILLE TO STATE STATUTORY AMENDMENTS AUTHORIZING IMPROVEMENTS IN THE INFORMATION PROVIDED TO LOCAL GOVERNMENTS BY THE STATE RELATED TO COLLECTIONS OF LOCAL SALES AND USE TAXES WHEREAS, the Arkansas Department of Finance and Administration (DF&A) collects sales and use taxes levied by cities and counties in Arkansas under the same tax administration system that is uses to collect State sales and use taxes, and as such, local taxes are "piggy backed" along with the collection of State sales and use taxes; and WHEREAS, the State withholds an administrative fee of three percent (3%) from local sales and use tax collections to fund the cost of such collection service which totaled approximately thirty million dollars ($30,000,000.00) in 2011; and WHEREAS, all taxing entities are entitled to have information about the collections produced by the taxes levied in order to monitor, evaluate, budget and project the sales and use tax collections they are entitled to receive; and WHEREAS, existing State law does not authorize or require DF&A to provide information to local governments that is useful and satisfactory to monitor, evaluate, budget and project local sales and use tax collections; and WHEREAS, laws in neighboring states authorize and require the release of information that is satisfactory to serve the needs of local governments which includes sales and use tax collections identified by the specific taxpayer, and that experience in such states demonstrates that related procedures and reports can be efficiently administered and produced, and that similar laws can be adopted and administered in this State; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. That the City Council of the City of Fayetteville, Arkansas hereby supports amendments to Arkansas state law which will authorize and require information to be provided to the Mayor or the Mayor's representative that will permit the City to fully and successfully monitor, evaluate, budget and project local sales and use tax collections, that any information attributable to a specific taxpayer should only be released following an agreement to keep such information confidential, and that specific taxpayer information should be exempt from release under the Arkansas Freedom of Information Act. Page 2 Resolution No. 25-13 Section 2. That the City Council of the City of Fayetteville, Arkansas hereby determines that any information provided which can be identified to a specific taxpayer should be made available for the monthly collection and calendar year to date by regular mail, email or by a dedicated online account at the option of the local government in an electronic worksheet or PDF format, not later than thirty (30) days following the most recent monthly tax distribution. The information should include details and totals that agree or reconcile to the related sales and use tax collections distributed by the State Treasurer to a local government for each given month, and the information should be updated as required by subsequent adjustments due to refunds, rebates, additional sales and use tax payments or any other matter affecting the sales and use tax collected for a particular period. PASSED and APPROVED this 51h day of February, 2013. APPROVED: ATTEST: By:���— SONDRA E. SMITH, City Clerk/Treasurer m . FAYETTEVILLE.�= • 8 •o� R .;Ql-A NSP , �i 61111►► O City of Fayetteville Staff Review Form City Council Agenda Items and Contracts, Leases or Agreements 2/5/2013 City Council Meeting Date Agenda Items Only Don Marr & Paul Becker Chief of Staff/Finance Chief of Staff/Finance Internal Sery Submitted By Division Department Action rtequirea: Approving a Resolution supporting legislation to Improve Sales Tax Department o Finance & Administration $ No Cost Cost of this request Account Number Project Number Budgeted Item $ Not Applicable Category / Project Budget $ Not Applicable Funds Used to Date Remaining Balance Budget Adjustment Attached Z&= /- 3-/3 Department Director Date :tfttorney Date `Pa"I 0- l - 3_.0 J3 Finance and Internal Services Director Date L— Date to l� Comments: Program Category / Project Name Program / Project Category Name Fund Name Previous Ordinance or Resolution # Original Contract Date: Original Contract Number: Received in City 1- 0 3- 1 3 A 1 1: 4 5 C V D Clerk's Office Received in Mayor's Office I I Revised January 15, 2009 Tayvree;lile City Council Agenda Memo To: Mayor and Members of the City Council From: Don Marr, Chief of Staff )QW -- Paul Becker, Chief Financial Officer PA B Thru: Mayor Jordan 1 Date: January 3, 2013 City Council Meeting Date: February 5, 2013 Subject: Resolution Supporting Legislation to Improve Sales Tax Collection Information Recommendation: The City Staff and Administration recommend on behalf of the Mayor's office that the City Council of the City of Fayetteville, AR pass a resolution in support of the State Legislators passing legislation that would allow the Arkansas Department of Finance & Administration to provide details & totals that will agree or reconcile to the related tax collections distributed by the State Treasure to a local government and will provide updated details to subsequent adjustments due to refunds, rebates, additional tax payments. We believe this will provide all cities useful data to successfully monitor, evaluate, budget and project local tax collections. Background: The Arkansas Municipal League contacted all cities in Arkansas including the City of Fayetteville, seeking support for amendments to Arkansas laws to authorize and require sales tax information by individual business to be provided to the Mayor or his designate that would permit cities to fully and successfully monitor, evaluate, budget and project local tax collections. Neighboring states (Oklahoma, Missouri, Texas) currently authorize and require the release of information that is satisfactory to serve the needs of local governments by providing tax collections identified by specific taxpayer. Currently the State of Arkansas only provides a single payment of taxes, with no details by specific tax payer, specific rebates/refund details late payments, etc. The State of Arkansas Department Finance & Administration currently withholds an administrative fee of 3% from local tax collections to fund the cost of such service. Budaet Impact: There is no anticipated impact to the City's Budget. The fees paid and detailed collections are already in place, and would only provide that DF&A provide those details to an asigned individual at the City. 113 West Mountain 72701 (479) 575-8323 accessfayetteville.org TDD (Telecommunications Device for the Deaf) (479)-521-1316 RESOLUTION NO. A RESOLUTION STATING THE SUPPORT OF THE CITY OF FAYETTEVILLE TO STATE STATUTORY AMENDMENTS AUTHORIZING IMPROVEMENTS IN THE INFORMATION PROVIDED TO LOCAL GOVERNMENTS BY THE STATE RELATED TO COLLECTIONS OF LOCAL SALES AND USE TAXES WHEREAS, the Arkansas Department of Finance and Administration (DF&A) collects sales and use taxes levied by cities and counties in Arkansas under the same tax administration system that is uses to collect State sales and use taxes, and as such, local taxes are "piggy backed" along with the collection of State sales and use taxes; and WHEREAS, the State withholds an administrative fee of three percent (3%) from local sales and use tax collections to fund the cost of such collection service which totaled approximately thirty million dollars ($30,000,000.00) in 2011; and WHEREAS, all taxing entities are entitled to have information about the collections produced by the taxes levied in order to monitor, evaluate, budget and project the sales and use tax collections they are entitled to receive; and WHEREAS, existing State law does not authorize or require DF&A to provide information to local governments that is useful and satisfactory to monitor, evaluate, budget and project local sales and use tax collections; and WHEREAS, laws in neighboring states authorize and require the release of information that is satisfactory to serve the needs of local governments which includes sales and use tax collections identified by the specific taxpayer, and that experience in such states demonstrates that related procedures and reports can be efficiently administered and produced, and that similar laws can be adopted and administered in this State; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. That the City Council of the City of Fayetteville, Arkansas hereby supports amendments to Arkansas state law which will authorize and require information to be provided to the Mayor or the Mayor's representative that will permit the City to fully and successfully monitor, evaluate, budget and project local sales and use tax collections, that any information attributable to a specific taxpayer should only be released following an agreement to keep such information confidential, and that specific taxpayer information should be exempt from release under the Arkansas Freedom of Information Act. Section 2. That the City Council of the City of Fayetteville, Arkansas hereby determines that any information provided which can be identified to a specific taxpayer should be made available for the monthly collection and calendar year to date by regular mail, email or by a dedicated online account at the option of the local government in an electronic worksheet or PDF format, not later than thirty (30) days following the most recent monthly tax distribution. The information should include details and totals that agree or reconcile to the related sales and use tax collections distributed by the State Treasurer to a local government for each given month, and the information should be updated as required by subsequent adjustments due to refunds, rebates, additional sales and use tax payments or any other matter affecting the sales and use tax collected for a particular period. PASSED and APPROVED this 5 h day of February, 2013. APPROVED: ATTEST: By: By; LIONELD JORDAN, Mayor SONDRA E. SMITH, City Clerk/Treasurer Local Sales Collectiop Information: Part 3 Some information is made available by the state, but it is simply not satisfactory to serve the legitimate interests of local governments. Good management of city revenues requires that city officials be able to monitor local sales tax collections and understand trends. This article —the third in a three-part series —makes recommendations for improvement. By Paul Young, League staff hies have expressed for many years a need for detailed, historic sales tax collection informa- tion as a basis for budgeting future revenues. Also, many have experienced great frustration when they are faced with significant fluctuations in monthly collections without satisfactory explanation or a means of understanding the cause. Since local sales tax collections are "piggybacked" on the state sales tax system, cities have no part in the collection process and therefore have no access to taxpayer information. For the cost of administration, the state withholds 3 percent of total collections before the funds are remitted to cities and counties. The total amounted to almost $28 million for 2011. When I was previously working in public finance and handling sales tax bond issues for cities, I would often be asked by a rating agency for a list of the top 10 sources of sales tax receipts for a city. The question was intended to identify the overall economic stability of the tax and any risk inherent in the pledged revenue stream associated with concentration in a few sources. Cities have a similar interest in evaluating the reliability of tax revenues to support ongoing operations, but unfortu- nately no such information is currently available. In the January and February issues of City & Town, we provided an overview of information available to cit- ies (and counties) from the Department of Finance and Administration (DF&A) about local sales tax collections. The January issue provided a listing of specific informa- tion that cities can access online or by request, as well as specific staff contacts who are available to provide as- sistance. In the February issue, we provided an overview of information available from DF&A on a quarterly basis that provides a listing of local sales tax collections by business code according to the North American Industry Classification System (NAICS). This information has been provided as an accommodation by DF&A for the past 10 years but is not governed by written policy or procedures. Sales tax revenues currently produce a significant portion of city revenues. As such, we believe that cities 16 levying local sales taxes are entitled to satisfactory infor- mation about their tax collections. That goal is currently not possible due to unnecessarily restrictive statutory provisions that prevent anyone outside DF&A from re- ceiving tax information that can be specifically identified with a particular taxpayer. Additionally, DF&A does not currently have dedicated staff or information resources necessary to do the job. Staff members that currently assist cities with the business code listing do so on the basis of time available. In fact, individuals other than those previously provided by DF&A and mentioned in the January article have responded to inquiries since that time. Without specific procedures for the preparation of the listing of business code information, it tends to be prepared in an inconsistent manner. And a taxpayer's business code is not required for the state collection system and therefore not subject to procedures to insure accuracy. The impact of these problems is compounded by the lack of dedicated staffing and resources for this activity. The solution to this problem will require statutory changes to modify the existing confidentiality restric- tions while protecting the legitimate business interests of confidentiality. We recommend the following guidelines for specific information that should be available monthly in electronic worksheet or other suitable format to the chief executive officer or designee of a county, city or town that levies a local sales and use tax: 1. A schedule of net sales and use tax collections with totals for each taxpaying or collecting entity identi- fied by account identification number, accurate NAICS code, legal name, business name and report- ing address; 2. A schedule of sales and use tax rebates and refunds with totals for each taxpaying entity identified by account identification number, accurate NAICS code, legal name, business name and reporting address; 3. A schedule of tax collected related to automobiles and other personal property when the tax is paid by the purchaser when registered with the state in CITY & TOWN one amount for each separate category of personal property; 4. The combined totals of tax collections per the schedules above plus totals for any other collection source or expense for any month should agree or reconcile to —and provide supporting details for —the related total tax collections distributed by the State Treasurer to the particular county, city or town for that particular month; 5. A schedule of total collections grouped by an accu- rate NAICS code category that agrees with the total reflected on the schedule described in item 4; 6. Taxpayers with no tax due may be excluded from the report; and 7. The above schedules will be updated as required by subsequent adjustments due to refunds, rebates, additional tax payments and any other adjustments to the tax collected for a particular period. As illustrated by the accompanying table, authority exists in neighboring states (Missouri, Oklahoma and Texas) that would satisfy most of the goals and objectives listed above. We believe the Oklahoma model best serves our needs with two levels of information available. The initial level of information is similar to what is currently in place in Arkansas but more accurate and reliable. The higher level fully supports the goals listed above, including the ability to support and reconcile with actual receipts as described in item 4, and is available if taxpayer specific information is kept confidential. The Oklahoma state tax structure is also similar to Arkansas's, which will likely make implementation easier. And their system is governed by an ongoing cooperative effort between the Oklahoma Tax Commission and the Oklahoma Municipal League. A similar arrangement in Arkansas should help the system work more successfully over time. As stated in our previous articles, the ultimate goal would be to produce information that is reliable and in- formative, permitting the user to understand what gener- ates tax revenues and monitor trends, as well as facilitate a sound basis for budgeting future collections. Also, it should be consistently prepared in a useful format. Thanks to Cindy Frizzell ofour staffwhose experi- ence in multi -state tax administration was invaluable in obtaining information about how neighboring states deal successfully with this issue. We welcome your comments and suggestions, as well as indication of your support for the legislative changes that will be required. Paul Young is the League's Finance Director. Contact Paul at 501-374-3484 Ext. 125, or entail pyoung@arnfl.org. Sales Tax Reporting for Local Governments Arkansas compared to surrounding states Admin Infomwtion Reconcilimion Fmquoncy CanBdanriahy A t Ca Ad.nndiy Add Busi'wn laml Cops Mismlloneovs Fees Fomror Prams RV., ed vioksnon Deroils No!'°qu ad No dalai6- local cap of No staff or tech Arkansas Ekcnonic Quarterly- -Current law Gauped by purchases over $2,50D co— nology resources dedicated to (CURRE MI 3% Spreadsheet No U on R r p .guts arely reto N/A NAIL$ Codas bv! ,par g issue of "" support in(armo- ss ro informarion no! reliable ar complek subseq� t'.hate Lion for fowl poymenn govarnmann Ekcnon c Okkho d D. p< de t pan h th p bhc Dediooted sloth Arkansas 3% Spreadsheet .Yes-Toof Mantis b Y , if g to nfide n li T xa prow de d hr Pon( ) ` No than g d'—'coo to (PROPOSED) r the' use Ohl forma! Collections Lka Okhhoma what wovN 6e hd npnl port Iyesllike perform ncoo—y rocks. 'approprlota. Oklahoma Avoiloble No deroih- No local cop'' Oklahoma- 1 ' on Public Yes - Total Monthly No N/A Grouped by SIC' lb"' no issv. on roponiig of Similar ro corn., Arkansas info but Publdc Reporn W.Wh, in Colkclions codas by local subsequent rebate m6obla and useful ro61e former Governments paymenn Okhhamv - - : Rem ved (r B No boot caps, thus No u ous Confidential. I% E6ctronc Y.s. TOO Monthly .Yes affi /I b fi t be', rw'uv. r pon'-g of breach sof " Reports spreadsheet Collaui.ns and/ imprison- add ass, SIC , s1b confdamrehly not collections �hb01e noted to data Upon R t p °rtUeS Business name, No "0" ""'. thus, no issue A Iecol govern• Missouri 1% CD Yes -Tool Collection -Annually Free/Available Yes Fe6n Convlctlon y _ unt nvmbo', address, SIC', o ti f y ".n1 rebate me thm a«e,s to Monthly for f- collection au sequen all rox records pvymenh Al the poi of No -Only ; solestaxcoleo Stot. to. structure includes Bus es Bon, o maximum relies heavily on Texas None Elecben Spreadsheet b - s that neolly ramp Monthly Yas Mid rm Conwchon r t .tier, add ;.n, of 2% local is aed prapeny roxes. No � ov breaches ra Ilwn " collections subseppli No quent No ofconhd.midiy $5,000 r.bam to noted to data:'. =nl reidar. APRIL 2012 'SIC moons Standard Industry Coda which is in the process of 6eing replaced by NAILS. 17 r