Enhancing Municipal Sales Tax with the Oklahoma Tax Commission

1. Enhancing Municipal Sales Tax with the Oklahoma Tax Commission Be Proactive! Increasing Sales Tax Revenue

2. Municipal Audits

3. What is the Independent Audit Program? • Allows sales/use tax audits by cities/towns • Can use own staff or outside audit firms • Auditors are trained/approved by OTC • Appointed as “agent” • Opt out option relieves OTC of auditing • OTC reimbursement • 1% retentionfee • Pro rata share of audit costs • OTC still required to audit!

4. Why should I pay for an audit? • Might not be needed in towns with limited number of businesses • Benefit – past history 6 to 1 cost benefit ratio • OTC targets audits with the most impact • Who knows your businesses better than you? • City audits will likely increase overall compliance • Fairness to those paying taxes

5. Auditors • Three approved audit firms to date • Designated as agents of OTC • Other auditors? • Audit contracts

6. How do I get started? • Initiate your own audits vs shared audits • New contract with OTC • Contract with auditor(s) • Delegation of Authority? • Target good audits • Visit with other cities • Weigh cost/benefit

7. Audit or just participate? • Initiate your own audits or just participate in other cities’ audits • If only participating in others audits, will be contacted by the OTC • Opt in or out of audits • Opt out – relieves OTC of responsibility for taxpayer in question • 3 year audit -period

8. Process overview • You and/or your auditor will select an audit • You contact the OTC, OTC reviews/approves • All cities with possible liability should be contacted • Opt in/out • The OTC contacts taxpayer • Audit started and completed • Auditor submits audit package to OTC

9. Process overview (continued) • If approved, OTC will provide confirmation of assessment • Assessment vs eventual collection • Billing & payment • Audit disputed • OTC reimbursement • 1% retention fee • Pro rata share of audit costs

10. OKC audit program • Focus on compliance and taxpayer education • “Keep small problems from becoming big problems” • Larger audits likely referred to OTC • Who to audit? • Delegation of authority • Measuring and reporting results • Tracking 1% fee

11. OKC results • Program implementation 1st 6 months • Results • Audits completed: 27 • Assessments: $407,000 • Audit costs: $62,000 • Recovery to cost ratio: 6½ to 1 • Audit relationships

12. Other Compliance Activities

13. Other Compliance Activities • SB750 approved 2011 legislative session • May elect to pursue missing or delinquent taxes • Unregistered seller • Municipal prosecutions • Other activities • If additional State taxes recovered, can be reimbursed ¾ of 1% • Municipal prosecutions not subject to retention fee • OTC not relieved of contracted services

14. Program Benefits • Additional access to OTC data • Enhance selection of municipal audits • Increased ability to contact taxpayers directly • Additional revenue • Flexibility in pursuing other possible compliance activities

15. Potential Compliance Activities • External data comparisons • New businesses • Known issues with taxpayers • Sale of businesses • Collection letters

16. Municipal Prosecutions • Ordinance • Delinquency report • Council support •  Collection letter • Media support

17. Questions? • Oklahoma Municipal League OTC Liaison Board (800) 324-6651 http://www.oml.org