“ Our Sales Tax and the Oklahoma Tax Commission ”

1. “Our Sales Tax and the Oklahoma Tax Commission” OML Conference Presentation Wednesday, Sept. 29th, 2010 1:00-2:00 Presented by: Bob Ponkilla, Oklahoma City Treasurer Stan Jones, Tulsa Treasury Manager John Vincent, Muskogee City Attorney Ross VanderHamm, Edmond Finance Director

2. In May, 2010, a 9 Member Liaison Board was formed to address a myriad of operational issues with the Oklahoma Tax Commission. Members include: Joe Don Dunham, Finance Director, Altus Doug Enevoldsen, City Manager, Bixby Mike Fina, Mayor, Piedmont Ed Gordon, City Manager, Bartlesville Doug Haines, Assistant City Manager, Woodward Bob Ponkilla, Oklahoma City Treasurer John Vincent, City Attorney, Muskogee Stan Jones, Treasury Manager, Tulsa Ross VanderHamm, Finance Director, Edmond

3. Primary Purpose of the Sales Tax Liaison Committee To work with the Oklahoma Tax Commission on various sales & use tax collection and enforcement processes in an effort to assist them in providing the cities and towns of Oklahoma with accurate, timely, and complete reports, and apportionment of 100% of the taxes due.

4. Priority Issues Contract Revision Accountability Audits and Local Enforcement Computer Capability: Reports (both form and content)

5. OTC Contract Revision As it’s top priority, the Board has reviewed and developed a thorough revision of the contract with OTC for collection and enforcement of municipal sales and use taxes. Each community is required (by current state law) to enter into a contract with the OTC for collection/enforcement of sales/use taxes. A key element of the proposed revisions is our intent to establish a template that is applicable to all communities, and to more clearly define the responsibilities of the Oklahoma Tax Commission. Your input is critical to ensure a valid and workable agreement.

6. Accountability The second priority issue is to revamp the reports from OTC - both as to form and content - with an eye to making them more user-friendly. The Committee feels strongly that the OTC should be accountable to all cities and towns of Oklahoma. With over $17,000,000 annually provided to the Tax Commission (from the retainage fees required from cities and towns), it is imperative that the OTC be able to provide ongoing, transparent justification as to how these budgeted funds are being used to collect and enforce sales and use tax payments.

7. Audits & Local Enforcement Audits are a critical process in the enforcement of accurate sales & use tax payments. The OTC should increase the number of audits they perform, and provide ongoing/direct communication to cities & towns on the status/outcome of these audits. The Committee also believes that cities & towns should be able to partner with the OTC to assist in this vital enforcement tool.

8. June 2, 2010 City files sales tax charges against former business owner By Liz McMahan Phoenix Staff Writer The City of Muskogee has filed charges alleging Jeffrey Cayne Naylor, doing business as Hilldale Food Mart, has failed to pay sales taxes for at least 46 months. Naylor could not be reached for comment. A clerk at Hilldale Food Mart, which is at South Cherokee Drive and Smith Ferry Road, said the store is under new ownership. Naylor is to appear for arraignment at 8:30 a.m. July 14 in Municipal Court. The charge is a misdemeanor. This is the third sales tax charge the city has brought against local business owners for failure to report and remit sales taxes. Earnest Lee Norfleet Jr., doing business as Alice’s Flowers, 909 W. Okmulgee Ave., and William Stimmell Jr., doing business as Mud Bug Motor Sports, 504 S. Main St., are to appear for arraignment at 8:30 a.m. Wednesday on charges brought against them in April. The businesses are among more than 80 in the city named by the Oklahoma Tax Commission as not having remitted sales taxes in recent months or years.

9. Roy Tucker, assistant city attorney, said the list is confidential unless charges are filed. However, several of those listed are now deceased. He estimates the list has about 70 business owners that potentially could be charged. • Like most Oklahoma cities and towns, Muskogee’s sales tax receipts have dropped off since July 1. City Manager Greg Buckley said the Oklahoma Tax Commission has not been as aggressive as possible in collecting delinquent taxes: • The charges against Norfleet allege he has not filed sales tax reports for his company since July 2007. • Stimmell allegedly has not filed a report since July 2008. • Naylor is accused of not having filed from March 2006 to December 2009. • Sales taxes are charged at the time of sale and are due to be paid to the state the next month. Businesses that have closed are required to report they are out of business. • City files sales tax charges against former business owner • By Liz McMahan Phoenix Staff Writer

10. Citation involving sales tax heard in courtBy Jessica Miller E-E City EditorFriday, July 30, 2010 12:27 PM CDT Another citation involving sales tax collections has been heard in municipal court.Jose Jasso pleaded guilty and was assessed a $500 fine — plus court costs — for failure to properly register sales and the sales tax collected on those sales.In late 2009, City of Bartlesville officials discovered a number of local businesses were failing to remit sales tax collections to the state. Earlier this year, the Bartlesville City Council passed an amended ordinance to improve the enforcement of collecting and remitting taxes. Through the change, the city can issue fines and penalties for the failure to collect or remit sales tax revenues and can perform audits on businesses. Once the Oklahoma Tax Commission says a business is delinquent and the city verifies its delinquency to be 90 days or more, the city can take action. According to Chief Building Official Robert McGuire, once the city has contacted a business twice and the business does not become compliant with the OTC, the city will issue a citation. So far, four individuals have been issued citations — three were heard in court last week.

11. In Jasso’s case, McGuire said Jasso appeared in court with an individual who identified himself to be the manager of Senor Salsa restaurant — where the sales reportedly occurred. Jasso was issued a citation on July 14, after city officials contend they observed him — on more than one occasion — running some sales on the register while not running others. When receipts were requested for sales not run on the register, Jasso reportedly ran the receipts up on a 10-key machine, rather than the register, and a 10-key tear-off was handed to the customer. McGuire said taxes could then not be identified. He said the register was working and paper tape, recording all transactions, and receipt tape were all in place and found to be working correctly.“I know that the citizens of Bartlesville want to know that sales taxes are being properly collected on sales and properly remitted to the state,” McGuire said.According to McGuire, city officials will respond if citizens report sales are not being properly registered. To report improper registration of sales, contact the Building and Community Service Department at 338-4233.“We will take the information and we will investigate,” McGuire said. Citation involving sales tax heard in courtBy Jessica Miller E-E City Editor

12. Computer Upgrade

13. Key Legislative Issues HB 3054: This bill creates the Municipal Fiscal Impact Act, which requires a fiscal impact statement for any bill or resolution which is determined to have a direct adverse fiscal impact from any legislatively-imposed mandate using municipal resources or reduces existing municipal resources. HB 2359: (Passed the last day of the Session) SECTION 16. is amended to read as follows: Sec. 2702. A. The governing body of any incorporated city or town and the Oklahoma Tax Commission are authorized and empowered to shall enter into contractual agreements whereby the Oklahoma Tax Commission shall have authority to assess, to collect and to enforce any taxes or, penalties or interest thereon, levied by such incorporated city or town, and remit the same to such municipality.

14. House Bill 2359 cont. Vendor Discount: Changed the vendor discount for timely payment of tax due as follows:  Current law’s 2.25% vendor deduction is reduced to 1%. The above amount is capped at $2,500 which is reduced from current law’s $3,300. Mandatory Contract Amendment:The Board discussed the ramifications for municipal bargaining power with OTC in light of the amendment in Section 16 mandating municipalities to contract with OTC for sales and use tax collection. Independent Audits:(new paragraph in Section 16D. Provided further that, upon the request of any incorporated city or town, the Oklahoma Tax Commission shall enter into contractual agreements with such municipality whereby the municipality would be authorized to implement or augment the enforcement, either directly or through contract with private auditors or audit firms, of the municipal tax.

15. House Bill 2359 cont. OTC Reporting:An amendment to 68 O.S. 205.1 (the confidentiality section) clarifies and codifies reporting options from OTC to municipalities. The key provision in the amendment is the language, “include but not limited to” the types of information listed in that section. It is very difficult to obtain information about payment arrangements made by a delinquent taxpayer with OTC.

16. A Key Contact for Oklahoma cities and towns on Sales & Use Tax Issues is… Dave Francis City/County Coordinator Oklahoma Tax Commission Taxpayer Assistance Division Post Office Box 269057 Oklahoma City, OK, 73126-9057 405-522-6600 DFrancis@tax.ok.gov