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Enhancing Municipal Sales Tax with the Oklahoma Tax Commission. Be Proactive! Increasing Sales Tax Revenue. Municipal Audits. 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
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Enhancing Municipal Sales Tax with the Oklahoma Tax Commission Be Proactive! Increasing Sales Tax Revenue
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!
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
Auditors • Three approved audit firms to date • Designated as agents of OTC • Other auditors? • Audit contracts
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
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
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
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
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
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
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
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
Potential Compliance Activities • External data comparisons • New businesses • Known issues with taxpayers • Sale of businesses • Collection letters
Municipal Prosecutions • Ordinance • Delinquency report • Council support • Collection letter • Media support
Questions? • Oklahoma Municipal League OTC Liaison Board (800) 324-6651 http://www.oml.org