Sales tax evasion 

Are hundreds of millions of dollars being overlooked by the State's Dept. of Revenue?

Amidst the State’s budget woes, it appears that millions of dollars in revenue will go unclaimed because of businesses who evade payment of sales tax.

“There is revenue out there that is going uncollected by the state,” says Amy Henderson, a spokesperson for the Georgia Municipal Association (GMA). “It’s not a new tax. It’s money that is owed to state and local governments.”

The Department of Revenue (DOR) goes after delinquent taxpayers every year, and in the last five years, they have collected $515 million in additional outstanding funds thanks to increased enforcement.

That sum is only from businesses who are on the DOR radar. Critics say the DOR has failed to increase transparency and work more closely with local governments to identify unregistered businesses that are collecting sales tax, but not remitting it to the state.

State Representative DuBose Porter from Dublin, who’s among field of current Democratic gubernatorial hopefuls, cites two pilot studies conducted last year by the GMA, DOR and the Association of County Commissioners.

According to the studies, “25 percent of the businesses who have a business license do not have a sales tax number.

"This is after taking out the lawyers and other people who don’t collect sales tax,” says Porter. “We collect about five billion in sales tax... 20 percent would be a billion dollars.”

DOR Commissioner Bart Graham doesn’t accept that there could be $1 billion in missing revenue.

Some believe that the solution is to localize sales tax collection.

Graham argues that allowing municipalities to collect sales tax would create mayhem for businesses who operate in several counties, forcing them to file multiple returns and opening them up to audits from numerous jurisdictions simultaneously.

Other groups say privatizing collection would be preferable.

The GMA wants to improve transparency.

“We want to know where the money is coming from and we want to know that all the money is being collected and sent back where it should go,” says Henderson.

The state pays a fee to retailers to remit sales taxes, and then the DOR send checks to county governments across the state. Local governments have no way of cross checking the correctness of the amount they are receiving.

Explaining why the system is problematic, Henderson mentions the recurrence of mystery money in the DOR coffers, millions in left over funds owed to local governments that never gets returned.

“That is something that happens every year,” says Henderson. “They have revenue they’re receiving that they don’t know where it came from.”

According to Porter, he became aware of the sales tax issue after a conversation with Dublin’s City Manager, who told Porter that they had received $200,000 less in SPLOST funds than in other sales tax, and the DOR couldn’t explain why.
Although Porter and others have attempted legislation that would overhaul the sales tax system, there has been resistance. Several bills addressing the issue haven’t survived second readings.

HB 1093, a piece of legislation co–sponsored by local State Rep. Bob Bryant, is working its way through the Senate after passing the House in March. The bill will require municipalities and counties to provide information on businesses to the DOR, but only under “certain circumstances.”

It falls short of the “accountability and transparency” that Henderson and the GMA would like from the DOR. Local governments will supply additional information to the DOR on businesses, but no additional information will be available to local governments from the state level.


A penny for your $515 million

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Patrick Rodgers

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