City Finance Director Bob Bartholomew Tuesday walked the Borough Assembly through city revenue and expense changes over the past five years, as well as explaining the city’s sales tax and revenue structure.
There were a few questions on the cash overview, but the Assembly dug into the subject of sales tax compliance — and what tools the city has to ensure compliance and collect back income owed by scofflaw merchants.
They heard that there is no mechanism except court judgments to force compliance with city ordinances, and seasonal businesses can simply reopen after skipping town without paying sales taxes. The city has to come after them in court, and it does.
Juneau’s expanding natural resources sector and successful seasonal tourism industry bring challenges to the four-person tax compliance office. Most businesses are in compliance, with just 2.4 percent of unlicensed firms winding up in a newspaper ad for delinquent taxes during 2012.
Last year 600 businesses were notified during one quarterly cycle and billed over three months. By the third month just 93 wound up on the delinquent list. Bartholomew cited recent high-profile cases of legal enforcement as a possible reason for the drop in numbers.
While the numbers of delinquent tax filers dropped, the report shows that delinquent taxes owed rose overall since fiscal year 2010 from $179,800 to $282,800 in Fiscal Year 2012.
“A new area for us to monitor are mining support services,” Bartholomew said. The city also keeps an eye on businesses operating Juneau International Airport.
Mayor Merrill Sanford wondered if the city has any means of seizing funds from scofflaw cashboxes, and heard that it takes a formal judgment to recover funds or garnish a PFD check.
Bartholomew mentioned one non-compliant business that was recently found to owe $400,000 in back sales taxes, prompting Assembly member Randy Wanamaker to ask which business that was. “This is a public matter,” Wanamaker said.
Sales Tax Administrator Joan Roomsburg told the Assembly the identity of the business wasn’t yet public information, and the matter of confidentiality was referred to the Department of Law at the request of the mayor.
Bartholomew said that business didn’t collect taxes, but “it wasn’t a situation where the merchant was collecting sales tax but did not remit it.”
Borough staff has gotten creative and hits the streets to interact with merchants, educating them and taking a special look at seasonal enterprises. The city has its own version of Google Earth, staffers taking photos downtown to track changes and make sure businesses have licenses and comply with sales tax.
While the Borough charges sales taxes, it does not require businesses to buy a borough business license in addition to the mandatory state license, although Bartholomew said after the meeting that topic is sometimes raised. Juneau will not do business with unlicensed businesses. The city also has the option of challenging state permits for things like liquor licenses if a business is in arrears for city taxes.
Taxes themselves were part of the larger presentation to the Finance Committee. Bartholomew said the city’s take from sales taxes comes from a big financial pool, and is moderated by tax exemptions.
The city imposes a 5 percent sales tax. The amount received in 2012 grew by 13 percent since 2008 to $42.3 million; alcohol taxes brought in 16 percent more — $855,000, and tobacco taxes a whopping 146 percent increase over five years from $830,000 to $1.4 million.
There are 35 exemptions to the sales tax, including the exemption for senior citizens. Bartholomew said that affects from the senior exemption are spread across many tax categories.
While local support from taxes and fees grew, and state support increased 44 percent since 2008 to $79.3 million, Assembly member Jesse Kiehl noted a reverse trend — federal grants and in lieu tax revenues dropped 29 percent since 2008 to $6.3 million.
Revenue from penalties and fines connected to property, sales and other tax penalties and ordinance violations dropped 31 percent since 2008 from $975,000 to $671,000.
The city’s overall revenues are $323.7 million, up 27 percent from 2008.
Comments (20)
Add commentOh my goodness!
John Moses working a beat? What's our Empire coming to?
So the number of scofflaws are down but the amount is up - looks like the City can focus its enforcement on a smaller number of businesses - that's a good thing.
But what to do about those seasonal businesses? Putting their names in the paper for public shame does no good - none of us shop with them, and none of their customers read the Empire, so that has no impact on their business. Must be some way to hold them hostage - make em post some sort of bond?
Draft
An ordinance so that it's all legal to close a business's doors after 60 or 90 days of either not reporting or submitting the sales taxes they have collected. If we need to solve the issue with a seasonal business, make them post a bond or something
Make it painful to be a crook and give our people the tools to enforce the laws
PS, disclose the name of the owner(s) of the business Wanamaker asked for that has stolen 400k of our CBJ revenues
And yet one of my businesses
And yet one of my businesses that contracts services with the city, that never sells an item, is required to send in a quarterly form that says I sold zero every quarter or else...
Seasonal Businesses
I wonder if 'there is no mechanism to enforce tax collection on seasonal businesses' includes not issuing them a business license while they are in arrears. I wonder if we can make our code state that the taxes must not be behind more than, say, one quarter (or whatever time period makes the most sense).
@notta - I am sure they will release the information about the $400k case as soon as the courts are done with it. You know how it is they don't talk about open cases, I bet that is the only reason for secrecy.
require a bond
to be posted before these businesses can operate. The bond should be based on the tax revenue potential of similar business based on historic sales tax records.
Unfair labor practices
I have never liked to pay any tax. The local sales tax is too much and we should retire the 4 extra percents and get it back to the 1% original tax allowed in the city charter.
Currently we businesses are required to collect and do all the paperwork with no compensation for our labor. We are compensated nothing for our timely reports and payments. Me thinks that more businesses may comply if there was an incentive for timely reporting and payment.
As much as I dislike taxes I do believe that we all should pay an equal amount of what ever that tax is. Further all exemptions should be eliminated, including the senior sales tax exemption and then reduce the sales tax to just 1%.
Finally, eliminate the sales tax on food items purchased in the grocery stores. The fact that we are held hostage to the City for 5% on food in unconscionable.
salestaxes
Food is and should continue to be taxed. What is the argument for excluding this item? Food is one of the basic items everyone uses and taxation of it probably follows the costs incurred by government for services. Schools, bus service, police etc. are cost items that track with population which also tracks with purchases of food.
@AKjustice
I have heard this complaint from other merchants, that they feel they should not have to collect the taxes. If the City had to collect taxes in some other manner, doesn't it seem like that would raise taxes rather than lower them? Would they seek out each consumer after each transaction? I just don't see how that would work if businesses did not collect the taxes. There are many costs to doing business, and I do not see a way for this to go away. It is not that I disagree with your point, I just don't see any way around it.
I am curious as to what compensations you would suggest for timely payment? I am truly interested in this idea.
I am not sure how the City could operate on a 1% sales tax. Maybe if all went well, everything was in order, and the AJ Mine was open the City could gain enough income to lower the sales tax rate.
I strongly disagree about your suggestion to eliminate the senior tax exemption. I would rather foot the bill than live off what little money seniors have as income. Besides, you (and all of us) will eventually benefit from it as well, right?
I have traveled quite a bit, and have only seen grocery taxes in a few cities. I am with you on this, but we either have to vote to spend money, or to lower taxes. There is no having our cake and eating it too on this one. So that cake will be taxed for now.
@ Paul
The senior sales tax exemption puts my blood pressure through the roof. I agree with your statement that, "I would rather foot the bill than live off what little money seniors have as income" but that is making the rather bold assumption that all seniors need the breaks. That simply isn't true. The exemption isn't means tested. It should be.
One of my parents will be old enough for the exemption in a few years. The retired parent is Tier I. The other parent, still working, makes close to $100,000/yr. In the mean time, my friends and I all support multiple people on incomes between $40,000-75,000. Why should my parents get a break? They don't need it.
I know that there are lots of seniors that are in truly dire financial situations. There are also plenty who retire comfortably and travel the world, or have vacation homes in Mexico, etc. I would like to see the exemption reflect that disparity.
Hopefully, when I am old enough for the exemption, the exemption will be means tested, and I won't need it either!
@ Lat and Paul
Lat:
I like working a beat.
Paul:
Business license enforcement is a state duty. Unlike the Matanuska-Susitna Borough, Juneau does not sell a borough business license.
Sales tax collection
is no different than any other things a business has to do to be in business. If your in business you have to track inventory, met payroll and related filings if you have employees, pay your utility bills, complete reports for insurance companies and a slew of other required item. Collect sales tax is no more of a burden than having to your receipts to the bank.
Besides most places use computerized cash registers that simplify reporting.
Senior exemption
Paul, it is my position that many of the seniors do not need the exemption. Others buy mostly food items and little else. This is why I feel that eliminating the senior exemption should be done. Perhaps a means test could be devised but it should allow only those that are truly poor and more than just below the median poverty line. Most of these, truly poor, already are subsidized and are getting a significant break. If this exemption should ever happen it would need to coincide with the removal of sales tax on food, prescription drugs and possibly other items of an essential nature.
As to your other comments concerning sales tax collection and compensation...I have no real answer at this time. I just do not like being forced by any government to collect from the public and turn it over. The people never really see the face of their local government collecting the money. All they see is the merchant taking their hard earned money. It is all too easy for the City government. I feel, as I have always felt, that our governments, yes all of them, are too large and always continue to grow. We the people can not afford that. How say you?
@daffy J.Moses, & AKJust
@Daffy - I had considered that some seniors did not need it, and thought that was not reason enough to cut them all off. However, you have changed my mind to think that on a case-by-case basis is the best route for that exemption. That sounds pretty fair to me. I wonder if that has ever been considered, and if the cost to implement it would out weigh the savings.
@J.Moses - Thank you, that was along the same lines as the answer I got from the Assembly. I am glad you posted that, because I neglected to come back and answer my own question on here. Awesome that the author answered on here, maybe that is not always in their best interest, but I like it. I know every detail cannot be crammed into each article, so the follow up answer is nice.
@AKJ - About senior exemption, most of the seniors I met last year were really concerned about this exemption going away. Now I suppose some of them could simply be overly frugal; however, they truly seemed concerned. Personally, my own grandmother would not likely make ends meet with only Social Security and retirement money if she had to pay all the same taxes as the working class. It should be researched as to whom is being given this exemption that does not rely on it. One worry is that the census says our population is aging, so it will only become a bigger concern that some people who can readily afford to continue to be taxed are not; in turn, the City loses that many monies.
I am for a small government as well, its long fingers dip into too many aspects of life and business already. Once it is involved too heavily, it usually throws off the natural balance of things ;for example, the way New York's rent control causes economic unbalance. I have read stories where owners will destroy a perfectly fine building to rebuild just to raise the rent to better match the going rate. So I am all in for a smaller government than it is currently; at every level, in every state. However, I just do not see any other way for the governments to collect the taxes in a reasonable manner. If there was a strong enough push for the burden to be lifted from businesses, I fear the answer would not be a good one. I see them, perhaps, taxing everyone based on some weighted average or something. Who knows, I think it would be a unpleasant surprise no matter what they came up with.
About your other concern, I think that most consumers understand that Uncle Sam is getting their share out of what you are charging. However, I also agree with you, because we (consumers) do not really break it down and separate what we spent into purchase price and taxed amount. We (consumers) just consider that we spent x-amount at Shoe Fly or what have you.
Senior exemption II
Paul, I too would be concerned about a possible 5% increase in my cost of living from the loss of the senior sales tax exemption. Combine that loss with the continued inflation of (this depends on who and how inflation is figured) 3% to 40% in some recent years and your grandmother has every reason to be concerned. her fixed income did not grow at the same rate as the inflation did.
We saw this happen in the 70's. Hyper inflation came in and wiped out the retirement plans of millions of Americans. We saw fuel go from 25 cents to over $1.00 in just one year. We saw 15% to 25% inflation for several years. Most recently we have seen 40% inflation in food alone over the past couple of years. 50% for the cost of fuel over the last 4 years. Truth is that the value of the dollar is in the toilet.
But I digress back to the question. When people fail to prepare for their retirement are, We The People, responsible to shore up their needs? I think not! Too often the public larges is called upon to fill the gap where personal planning should have taken place. No disrespect intended here Paul but Grandma may need to take in a roommate or move in with a relative. That is more the norm in many cultures.
Concerning the growing senior population in Juneau, I believe the most growth is from seniors moving to Juneau, from outside the state, not just that the existing population is aging. (I may be incorrect about that and if I am I am sure that I'll be called out for it.) And if that is true or not, what does that say about our incentives for those seniors? What is so attractive to them that they would come here or continue to live where it is winter for half the year. The reason is we have cheap subsidized housing, free transportation, they have free or subsidized health care, and on and on and on...
Point is we as a people can not afford all these give-a-ways. They are part of the cause that has gotten out City and our Country into the financial mess we are in.
I still say, eliminate sales tax on food and eliminate all sales tax exemptions.
Even the CBJ sales tax office
Even the CBJ sales tax office isn't clear about some of their rules. I asked them recently about exemptions for government entities and they couldn't clarify why one government organization would be tax exempt and another similar org wouldn't. There are also exemptions for our of town organizations that purchase services sold on a purchase order, even though the service is being received here in Juneau. Why would a service be tax exempt if paid by a check from an office in Fairbanks, but not exempt if they pay for it while they are in Juneau?
I don't have too much trouble
I don't have too much trouble with the senior exemption. I used to look at the exemption as kind of a "thank you" to the people who helped get Juneau on it's feet many years ago. What I do have a problem with is when family members of the seniors abuse the program by having mom/dad/grandma/grandpa/auntie/uncle purchase some of their big ticket items.
@akbrdguru
I 100% agree and have seen this done many times. I've lived and contributed to Juneau for 20 years and am nearing retirement. I won't be rich...so I look forward to the exemption and feel I'll need it...but tax fraud is what you describe. Hold Both the one commiting the fraud and the merchant that allows it accountable. Not all merchants know the end user but many just comply to avoid confrontation.
Complicated
Juneau has odd rules about what is a taxable transaction. For instance ...booking services. A coordinator booking Juneau services a hall, Florist, limo pays sales tax on every transaction and charges the consumer tax again on the package while an outside corp can do those things tax exempt and sell the package tax free using the same vendors. Who sells the better wedding package? Lots of little things tht make no sense.
@AKJ
@AKJustice - That is a good point, people should plan for their future and not rely on the Government. Except the Government takes money out of each of our paychecks for Social Security. A joke I know, because I received a letter saying I would get around 3/4 of what is coming to me when I am of age; however, they continue to take 4/4 out of my paycheck. So they make us give them money so we are not a burden on society later in life, except we still will be. You mentioned you own a business, so it may be easier for you to save for the future than it is for others. I am trying to get as many retirement plans implemented in my own life as I can, because I don't want all of my eggs in one basket. However, everyone is different and has different needs. I want what is best for everyone, even though I do tend to think along the same line as you are suggesting. That may be how we got to this point, and you and I are just not seeing the big picture because we are looking from our own viewpoints.
I would have to see all of the data and numbers on the senior tax exemption to be sure what side I fall on for that issue. For example, how much money is being lost to these exemptions. If it were ever decided that it was to go away, I would like to see it phased out rather than cut off. In that, when it was decided the current seniors of that day would not be cut off at all. Anyone within a decade would receive some percentage of exemption. Then the rest of us cut off; or some variation. I just don't think it is fair to pull the rug out from underneath anyone that is figuring the exemption into their retirement plans. You mentioned it was a surprise in the 70's, I would hate for Juneau to do that to people.
I too am all for reining in the give-a-ways. However, I see our City's spending to be as much at fault for the financial woes. We vote in so many projects that are only going to be used by a handful of people, and generate no (to little) income. I think we should spend less and tax less. I understand that we must spend and tax to both run the City and to promote growth of the economy. However, I think it has been a little out of control. Hopefully the new City administration will be a bit more frugal. I actually believe they will, but time will tell.
@AKB and Mama T
@AKB - dishonest people will take advantage of whatever they can, and there is not much hope to close every gap. I do not suggest that we do not try and discourage it either. We should do what we can, and those who take advantage of our community should be ashamed.
@Mama T - I hear that from a lot of people, in that, they are looking forward to the exemption. Personally, I would rather pay a 6% sales tax and allow the seniors to enjoy retirement as much as they can. We men are only expected to live 7 years after we are given the exemption, so I would like to enjoy it myself one day if that is the route the voters take. I also see AKJustice's points, so it is a tough one. I lean towards keeping it, and seeking other areas to adjust; but there are 30,000 opinions in Juneau.
About the tax fraud it would be hard for the merchant to stop this practice. I pick up my grandmother's groceries and medicines sometimes and use her tax exemption. I have never used it for myself, and never would; but I never really thought about the merchant may be thinking I am defrauding the government. It is too bad that lazy, or criminally-minded, people find it okay to not pay their own way. They abuse the services that are for the good of our people, our community. When people like yourself genuinely need the exemption, it makes me happy it exists. I really do not see a problem with government services that help people, except they are too easily abused, and there is no effort to prevent this. Mostly I am speaking of federal level programs. Good luck to you Ma'am.