TASK FORCE UPDATE
Tuesday, September 20th was the first meeting of the Task Force on Collection, Distribution and Enforcement of Municipal Sales Tax.
SB 216 by Sen. Susan Paddack and Rep. Ron Peters created the 11-member task force that is chaired by Sen. Cliff Aldridge and co-chaired by Rep. Scott Martin. The Task Force’s purpose is to examine the current process by which the Oklahoma Tax Commission (OTC) assesses, collects and distributes sales and use tax to cities and towns; look for efficiency and improvements with which OTC uses its resources; and issues related to the use of private sector entities for modernizing and improving the collection of audit functions. The Task Force is required to provide a report to the Governor, Speaker Pro Tempore and the Speaker by December 30, 2012.
Rep. Todd Russ and Sen. Bass are the other legislators represented on the Task Force. Municipal officials are the majority of the task force. Those serving to share the municipal voice are Mayor Patrice Douglas, Edmond; Mayor Randy Ross, Choctaw; Laura Johnson, Asst. City Manager, OKC; Doug Haines, Asst. City Manager/CFO, Woodward; Ross VanderHamm, Finance Director, Edmond; and Terry Simonson, Chief of Staff to Mayor Bartlett, Tulsa. Private businessman Chuck Thompson rounds out the membership.
Carolyn Stager, Executive Director led off the meeting by informing the Task Force as well as those in attendance about the cities’ over-reliance on sales tax as the only source for general operating funds for cities and towns. She also told the group about the two panels that OML has created to focus on revenue issues for cities and towns: the Municipal Revenues and Efficiencies Task Force and the Municipal Liaison Board with the Oklahoma Tax Commission, which has been meeting frequently for the past 18 months.
Stager stated that SB 216 was a result of a recommendation from the November 2010 Oklahoma Academy for Town Hall meeting; itself an unprecedented second town hall meeting called last year, which was devoted to municipal finance issues.
Bob Ponkilla, Oklahoma City Treasurer and a member of OML’s Municipal Liaison Board, said one of the biggest concerns was the contract that cities and towns enter into with OTC for the collection and distribution of sales and use taxes. As a result of the work of the Liaison Board and OTC, a new contract was created and has been sent to the cities and towns for adoption.
Ponkilla said OTC is continuing to work with OML on revising a plan with the Independent Audit Program. Looking into local enforcement issues and creating better communication is still an issue that needs to be resolved. Also, establishing a method for cost accounting and determining where is the 1% that municipalities are paying the OTC and how it is being used.
Tony Mastin, OTC’s Executive Director, echoed Ponkilla’s comments about working with OML on addressing the cities concerns and will continue to work with us on many issues. Mastin also informed the Task Force that the agency is in the process of getting a new system. The first phase will be completed by October 10th. This phase pertains to the withholding taxes, mixed beverages and cigarette taxes. It will take over a year for the sales and use tax portion.
Mastin stated that vendors want to work with municipalities on how they want the reports to look. He also said that the problem with delinquent payers is that current state law does not allow OTC to refer them to a collection agency until they are two months behind. There is a late fee of 10% on the outstanding debt. There is a 4% fee added on top of the delinquent bill, which does not come out of the money owed to the state, county and municipality.
Last month, out of 70,000 permit holders, 1,100 went to collections. Laura Johnson asked how many audits the agency did last year. Mastin responded telling her OTC did 553 audits in the last year, which Mastin admitted is less than one percent of the total amount of permit holders.
Terry Simonson informed the Task Force and members of the audience of the law that was passed this year, SB 750 by Sen. Marlatt and Rep. Sullivan, which will allow cities and towns to contract with a third party collector after they have been approved by OTC. He said this will help take some of the burden off OTC and has been mirrored after the independent auditor language that was passed in HB 2359 in 2010.
The next meeting is scheduled for Wednesday, October 5th.