Wednesday, June 18, 2014

Ketchum ends contract with State Tax Commission

City will oversee local-option tax starting Sept. 1

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By AMY BUSEK
Express Staff Writer

    The Ketchum City Council voted unanimously Monday to end the Idaho State Tax Commission’s oversight of the city’s local-option tax, ending a relationship that was voted into effect on May 6 of last year.
    The city invested $192,800 into the hiring of the commission, despite concerns from councilmembers and a split vote on the issue. In canceling the agreement with the Tax Commission, the city is invoking a “parachute clause” allowing it to end the arrangement with 60 days’ notice before the contract’s five-year term expires. 
    City Treasurer and Clerk Sandra Cady said in a June 16 staff report to the mayor and council that the reasoning behind the 2013 contract was that the Tax Commission has more staff to collect the LOT, has access to more electronic dossiers to collect the required taxes, has specific employees trained in finding nonpayers and an audit report revealed numerous entities who haven’t been paying the tax.
    However, Cady said the city faces at least a $125,689 decrease in revenue for fiscal 2014 compared to last year’s numbers. Coupled with the nearly $200,000 spent on hiring the Tax Commission services, she said, the city staff doesn’t see an increase in LOT revenues for the foreseeable future. City staff also assists the commission with LOT collection, she said.  
    The Tax Commission, Cady said, informed the city that it would take up to three years to determine which businesses needed to pay the LOT and substantially increase the amount collected from tax evaders. That would require almost $600,000 from the city in three annual payments.
    “We’re in a totally different world than we were then,” Councilman Michael David said at the Monday meeting. “We may have been misrepresented a little bit in what we were getting.”
    In handing the reins of LOT administration, collection and enforcement back to the city, “high risk entities” will be closely watched and interdepartmental collaboration will ensure enforcement of payments, Cady’s report indicates. Businesses with large cash sales will be contrasted against sales tax data. Construction businesses won’t need to pay LOT, though staff will work with nonlocal construction material businesses that deliver within Ketchum city boundaries. Vacation rentals will be targeted for compliance, with outreach to local landlords and follow-up compliance.
    The city’s administration of LOT taxes will begin Sept. 1, Cady said.      

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