Clerical mistake has cost the County Courthouse hundreds of thousands of dollars
A clerical error has been costing Summit County hundreds of thousands of dollars a year.
Several Snyderville Basin businesses listed themselves incorrectly as being located in Park City Municipal instead of unincorporated Summit County when filing their sales taxes with the Utah State Tax Commission.
"They share a zip code with Park City in some cases, or they just think of themselves as being in Park City, so when they were filing their taxes, they were misquoting," Summit County Manager Bob Jasper said. "To the city’s credit, they are the ones that figured this out and worked with the Tax Commission. Of course, they have a lot more budget staff than we do. We have a one-man show."
An observant resident started the ball rolling when the individual reported to Park City an incorrect tax listed on the receipt of a Basin restaurant.
"I looked into that and the tax amount they were reporting was incorrect, but when I went through to see if that business was showing up on our end," Park City Capital Budget Manager Nate Rockwood said. "It wasn’t, so that wasn’t one of the businesses. But after that, when we were just out there eating or doing anything, we started looking at the receipts to see if it was a bigger problem."
City staff saw that several Basin businesses were collecting tax revenue for the wrong entity.
"Once we discovered there were problems among a few businesses, we contacted the Tax Commission to see if we could work with them to see if there was a bigger problem, which there was," he said.
The Tax Commission identified 115 businesses affected by the error.
"In that list, there were a few that surprised me," Summit County Accountant Matt Leavitt said. "We don’t have time for staff to go around and check every business to make sure they are paying the right tax rate and to also make sure that tax is coming back to the county. So we look at it as going after the big fish."
Leavitt said they usually check on specific names, and have caught some in the past.
"But we have 800 to 1200 businesses," he said. "Park City found about 10 percent, but it was most definitely not 10 percent of the revenue."
Most of the businesses on the list were small businesses that were only paying the city a few dollars a year in tax revenue.
"About 10 significant businesses made up the bulk of what was there," Rockwood said. "On the rolls the Tax Commission were collecting, the entities would show up as Park City businesses. They would either charge the full Park City tax, or in some cases they may have still been charging the correct County tax, but they were coded incorrectly to the city. So the Tax Commission would get that and disperse it to the city."
The Tax Commission corrected the problem and sent notices out to all the effected businesses informing them of the sales tax they should be charging.
"The businesses collected the tax they thought they were supposed to collect, and sent that to the Tax Commission which divided it up," he said.
How much revenue was affected by the error over the years is unclear, Rockwood said.
However, Summit County has the option of asking the Tax Commission to redistribute the sales tax the last 90 days.
"We haven’t decided yet whether we’ll go back 90 days or not," Jasper said. "We probably will. I’m not sure how much it will be, but probably about $150,000 that the Tax Commission will owe us. And the rest of the year, we’ll probably get another $200,000 extra, which will help, because we’ve been hurting."
Leavitt said the amount redistributed to the county will likely be closer to $118,000. He compared it to finding a $5 bill, and not $100.
"It’s going to be a little boost in revenue, but I wouldn’t go out in spend it," he said. "At the end of the year, your sales tax is one of your more volatile revenues. So if the economy starts to go sour, that money can help you in just meeting your obligations."
According to Rockwood, the Tax Commission would likely deduct the revenue from the city’s next pay period.
"Our City Council supports whatever decision the county decides they want to do," he said. "For us, it equates to about 1 percent of the General Fund revenue, so as far as budgeting goes this year, it will have an impact but it’s not going to have a major impact we can’t handle," he said.
Next year, he expects the General Fund will be decreased by $465,000 and the transit fund will be $165,000 less than expected.
"It’s significant, but you compare it to the amount of revenue we were down during the recession and it’s not really comparable," Rockwood said. "It’s certainly something that we’ll work into the budget and will impact the budget in some way, but it won’t be a major change. I don’t anticipate it’s something that will reduce our level of service in any way."
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