Some slight changes to Oklahoma City ordinances could make it easier to collect about $17 million in delinquent tax payments from local businesses.
City staff proposed amendments to the city's sales and use tax ordinances at Tuesday's city council meeting, making it a Class A misdemeanor for a business to fail to report or pay its taxes to the city. The ordinance is set for a public hearing May 29 and a potential vote June 12.
The change, made possible by a change in state law two years ago that gave cities more power to enforce tax compliance, would reduce the potential municipal penalty for failure to pay sales and use taxes by making it a less serious offense. At the same time, the process to enforce it would be cheaper and less cumbersome.
“We're trying to motivate them to pay the tax,” city Finance Director Craig Freeman said. “The goal isn't to prosecute. The goal is to get the tax (money).”
Current Oklahoma City code makes it a Class B misdemeanor, which carries a stiffer penalty but is also more costly for the city to prosecute. Defendants charged with Class B offenses have the right to a jury trial because a jail sentence is a potential penalty.
If the council votes to approve the amendments, employees with the city treasurer's office would enforce the code. The city would start with letters to businesses accused of failing to report or pay their taxes. The next step would be a courtroom, but without the long road to a jury trial.
“A Class A offense, generally speaking, is (on) two dockets: arraignment and trial,” said Cindy Richard, head of the city attorney's Criminal Justice Division. “When you have a jury division, or a Class B, offense, there are many more dockets than that
A Class A misdemeanor is punishable by a fine of up to $500.
Sales and use taxes make up a huge chunk of city revenue, with sales tax revenue alone providing more than half of the general fund in next year's proposed budget. Sales taxes are charged to consumers on top of the retail price of goods and remitted by the business to the state; a use tax is what a business pays to the city for goods bought elsewhere but intended for use here.
About 1,100 businesses combined owe the city about $17 million in unpaid taxes now, but about $15 million of that comes from just 100 companies, Freeman said.
“It goes back years,” he said. “Some have already started trying to work toward a resolution. Most of them have not.”
By late Tuesday, the city had not yet provided the names of businesses at the top of the list nor the specific amounts they owe in response to an open records request.
City officials said they first had to double check the figures with the Oklahoma Tax Commission, and state laws also provide some protection against the release of sales tax figures because of their proprietary nature.