Cities Complain They're Being Shortchanged by the Tax Commission - NewsOn6.com - Tulsa, OK - News, Weather, Video and Sports - KOTV.com |

Cities Complain They're Being Shortchanged by the Tax Commission

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The City of Tulsa is suing the state after a phrase in the tax code was changed, making it illegal for cities to hire anyone besides the Oklahoma Tax Commission to collect sales taxes. The City of Tulsa is suing the state after a phrase in the tax code was changed, making it illegal for cities to hire anyone besides the Oklahoma Tax Commission to collect sales taxes.
Muskogee City attorneys decided not to wait for the tax commission to collect delinquent taxes. They are prosecuting businesses that are behind. Muskogee City attorneys decided not to wait for the tax commission to collect delinquent taxes. They are prosecuting businesses that are behind.
Muskogee Business Owner Lee Norfleet was 29 months behind in reporting and remitting his floral shop's sales taxes. But the OTC allowed him to do business as usual. Muskogee Business Owner Lee Norfleet was 29 months behind in reporting and remitting his floral shop's sales taxes. But the OTC allowed him to do business as usual.
State legislators gave the tax commission enough money to hire 35 new employees, all of them to work in collections. State legislators gave the tax commission enough money to hire 35 new employees, all of them to work in collections.

By Jennifer Loren, Oklahoma Impact Team

OKLAHOMA CITY -- If you live in Oklahoma, you've probably felt the effects of budget cuts in your town. That's because the budgets in most cities and towns are funded by sales tax revenue, which has plummeted in the last couple of years. Some cities are pointing a finger at the Oklahoma Tax Commission, saying it's not doing a good job collecting the taxes.

For the Oklahoma Tax Commission, collecting sales taxes for cities is big business. They charge cities 1 percent of the taxes they collect. But are cities getting what they pay for, or is the tax commission leaving them short-changed?

The Lawsuit

In the final hours of the legislative session this year lawmakers pushed through a bill, making a slight but very significant one-word change to the Oklahoma Tax Code. The tax code used to say cities and towns "are authorized and empowered" to enter into contractual agreements with the Oklahoma Tax Commission to collect sales taxes. It now says they "shall" enter into those agreements with the tax commission, making it illegal to hire anyone else.

"So they had to go in, sneak some legislation in at the last minute," said Tulsa Mayor Dewey Bartlett.

Bartlett cried foul and city attorneys filed a lawsuit [CV-2010-1038] against the state, calling the last-minute legislation unconstitutional. Tulsa had just signed a contract with a private company out of Alabama, outsourcing the collection of the city's sales taxes and cutting the Oklahoma Tax Commission out of the picture.

"We're just not satisfied that they're collecting all of our money and we need to collect some of it for ourselves," said Tulsa City Councilor Roscoe Turner.

Tulsa leaders estimate they're losing about $7 million a year in sales taxes because of the tax commission. They're not the only ones with concerns about the agency.

"We've been concerned about their lack of response to our question: Are we getting all of it?" said the City of Sand Spring's Vice Mayor, Mike Burdge.

Taking Matters into Their Own Hands

We asked Muskogee Assistant City Attorney Roy Tucker if city leaders there think the Oklahoma Tax Commission is doing a good job collecting sales taxes for municipalities.

"In my opinion they are not," Tucker said.

The City of Muskogee's revenue was down almost ten percent this year, taking a huge toll on their budget. So, city leaders decided to take matters into their own hands. Their city attorney's office is now prosecuting businesses when they're behind on their sales tax payments.

"We're not waiting around. We're trying to nip this in the bud before we have a number of other tax payers that go that far delinquent," said Tucker.

He says the city received a list from the Oklahoma Tax Commission showing 84 Muskogee businesses that were in arrears on their sales taxes. Tucker started with the most egregious offenders, calling them into municipal court to explain.

One of the businesses the city prosecuted hadn't reported or remitted sales taxes to the Oklahoma Tax Commission for 46 months. But according to Tucker the tax commission did not explain to the city why those taxes hadn't been collected. When the owner of that business appeared in Muskogee Municipal Court Tucker discovered his business had been closed for several years. The owner did not owe any sales taxes. But, Tucker says, the tax commission never cleared the business until that court appearance.

City attorneys also prosecuted the owner of Alice's Flowers and Gifts. He was 29 months behind in sales tax payments, but the tax commission allowed him to continue to do business as usual.

"I'll address it. I should have kept up with it. I was just running behind, primarily," said Lee Norfleet.

Norfleet said he had not been contacted by the Oklahoma Tax Commission about the delinquent taxes.

In an e-mail to the Oklahoma Impact Team, a tax commission spokesperson disputes that claim. According to their records a field agent contacted Norfleet in June. But their records don't show how he was contacted or what the outcome was.

Norfleet is on a payment plan now which includes hundreds of dollars in fines. He says he would have gotten caught up much sooner, had the tax commission contacted him.

Meanwhile, Muskogee City attorneys say they're happy with the outcome of the prosecutions. Tucker says a quarter of the delinquency cases they've worked have been brought into compliance, adding to their bottom line.

In Their Defense

A spokesperson for the Tax Commission says they are well aware cities are hurting for cash, but she doesn't believe it's because of the tax commission.

"Really the economy has been down nationwide, and when it's down people are spending less money and that's less sales tax," said Paula Ross, a spokesperson for the Oklahoma Tax Commission.

It is true, though, that the tax commission is operating now with about 150 fewer employees than just a few years ago. Ross admits that's taken a toll on collections.

"I do think it hurt some. I don't think it's the whole reason city sales tax collections have been down," said Ross.

She says tax collections should soon go up. Last session the legislature doled out an extra $3.2 million, which the agency is using to hire 35 more people. All of them will work in sales and use tax collections. Plus, she says new provisions in HB 2359 could help them pull in an additional $49 million in sales tax per year.

Ross also defended the commission, claiming they do a good job bringing delinquent taxpayers into compliance. She said in May field agents were assigned 5,700 delinquent accounts. Now only 192 of those accounts are not in compliance. That means businesses on that list have paid their delinquent taxes, signed onto a payment plan or that the business is closed and doesn't owe sales taxes.

"But it's like anything. If you need money you start doing different things," said Ross.

In Oklahoma City's City Manager, Jim Couch, says he's happy with the job the tax commission is doing. He says he understands the tax commission is working with limited resources. In fact Couch believes it's dangerous for Tulsa to hire an outside firm as it may jeopardize Oklahoma's involvement in the Streamline Sales Tax (SST) deal. The SST has been pending in Congress for years. It would levy a sales tax on goods sold online, bringing Oklahoma an estimated $85 million a year.

Moving Forward

The Oklahoma Municipal League has been in the middle of the tax commission debate for some time. Recently the OML put together the Municipal Revenue & Efficiencies Task Force co-chaired by Mayors Mick Cornett of Oklahoma City and Dewey Bartlett of Tulsa. A spin-off of that was a Municipal Liaison Board to the Oklahoma Tax Commission.

"Our members, as a whole are very disenchanted with the OTC and their lack of adequate reporting, auditing and down right enforcing vendors who are not paying," said Executive Director, Carolyn Stager in an e-mail to the Oklahoma Impact Team.

Stager said the OML is pleased that the Oklahoma legislature passed a bill this year creating a Municipal Finance Task Force which holds its first meeting next week.

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