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

• Appointed as “agent”

• Opt out option relieves OTC of auditing

• OTC reimbursement – 1% retention fee

– 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

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