Wednesday, March 20, 2013

Ketchum says ‘better pay up’ on LOT

Mayor breaks tie to add ‘teeth’ to tax enforcement

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By BRENNAN REGO
Express Staff Writer

Ketchum Mayor Randy Hall has nudged a split City Council toward paying the Idaho Tax Commission $192,800 per year to administer and enforce the city’s local option tax, or LOT. Hall said increased revenue from enforcing the LOT would cover that cost, and then some.

Hall cast his tie-breaking vote at a council meeting Monday, saying that even though contracting the commission to enforce the tax will be expensive, it’s the most efficient option for collecting money currently being “left on the table.” Cherise McLain, an attorney for the city, said the city could collect up to $500,000 more per year in local option tax revenue by hiring the commission to enforce the tax.

“The state has better tools than we do to collect this tax,” Hall said.

The city charges a sales tax of 1 percent on retail sales and 2 percent on building materials, liquor and lodging.

Hall said an audit on the tax, conducted in 2011 by Kalispell, Mont.,-based accounting firm Denning, Downey & Associates, found that almost 59 percent of “high-risk” businesses were not properly collecting or paying the tax. A report on the audit’s findings defines high-risk businesses as those with a large amount of cash or Internet sales, those in the construction industry or those in the vacation rental industry.

The audit also states that nearly 63 percent of contractors then working in the city were not registered with the city to collect and pay the tax. Hall has said at several previous council meetings that people renting homes or condos to visitors are also failing to collect and pay the tax.

“People are either not paying us or short-paying us based on what they’re collecting,” he said at the meeting Monday.

Councilman Baird Gourlay, co-owner of PK’s Ski and Sports in Ketchum, said it comes down to an issue of fairness. He said that as a business owner in the city, it makes him mad that people are cheating on the tax. He and Councilman Michael David voted to hire the commission to give enforcement of the tax more “teeth.”

Council members Nina Jonas and Jim Slanetz voted against hiring the commission.

“I’m concerned we’re not going to collect [enough to cover the cost],” Jonas said. “I don’t share confidence in the numbers.”

Slanetz said committing to pay that much money every year is “kind of frightening,” even if it yields increased revenue.

City Administrator Gary Marks said a contract with the commission would last only three years and would serve as a test. He said the city could opt out of the contract before it expires. He also said hiring the commission would be the most efficient, “toothiest” option and would yield at least a 10 percent increase in LOT revenue, and possibly a lot more.

The city’s fiscal 2013 budget predicts LOT revenue to be about $2,086,000.

The state would also benefit from more stringent enforcement of Ketchum’s local option tax, as it charges a 6 percent sales tax on all transactions that take place in Idaho.

Brennan Rego: brego@mtexpress.com

 

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