Friday, March 22, 2013

Fair is fair

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    There’s a new tax collector in Ketchum and it’s got some sharp teeth.
    Ketchum Mayor Randy Hall broke a 2-2 vote of the City Council this week to ink a contract with the Idaho State Tax Commission to act as the city’s enforcement agent. Its mission would be to pin down businesses that may be avoiding payment of local-option sales taxes on retail sales, building materials, liquor and lodging.
    The tax commission is a big dog to put on the trail of scofflaws, but a yapping Chihuahua or a cuddly little Shih tzu weren’t the dogs for this difficult job. The tax commission isn’t easily ignored and well-run businesses know it. It’s got a good record in collecting other outstanding taxes around the state.
    The Internet has made some businesses with taxable revenues invisible because they don’t have to occupy commercial offices in business areas or can fly under the radar simply by not registering to pay local taxes.
    The city has done well corralling the local sales taxes from businesses it knows about, generally the ones with bricks-and-mortar operations, but for a long time it has suspected that it was failing to collect from less-visible businesses, including those that rent vacation units short-term and some construction contractors.
    Collecting taxes from some but failing to collect from others in the same business creates an uneven competitive playing field because the practice penalizes honest taxpayers and benefits people who fail to pay for one reason or another. Such practices tend to foster disdain and disregard for the law.
    The city isn’t employing the State Tax Commission on a whim.
    In a 2011 report, a Montana accounting firm hired by the city found that almost 59 percent of so-called “high-risk” businesses were not properly collecting or paying the local-option sales tax. Such businesses included those with large amounts of cash, Internet sales, construction enterprises and vacation rentals.
    It also reported that nearly 63 contractors that worked in the city had not registered to verify that taxes had been paid on building materials.
    The city estimates it could bring in an additional half-million dollars a year if all businesses paid their fair share. That’s where the State Tax Commission and the city’s three-year contract for $192,800 come in. If the estimate is accurate, the city will pay 38 percent of the taxes owed to collect the taxes.
    It would be easier, cheaper and less risky for the city to ignore the problem, but it wouldn’t be doing its job. Tax collectors may not be popular, but without them honest fools would lose while scofflaws would profit.
    The city must reward honest taxpayers by making sure that those who don’t play fair face penalties. Fair is fair.

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