This month: How to boost sales tax collections without raising rates
Steps to a successful local sales tax compliance program:
- notify the Comptroller’s office whenever the local government entities’ (LGEs’) boundaries change because of annexation or de-annexation;
- request reports of “businesses by jurisdiction” from the Comptroller’s office. Compare these with utility account lists and property tax records to ensure that all businesses known to be located in the LGE appear on the list;
- provide copies of the “businesses by jurisdiction” report to LGE employees such as code enforcement officers, utility workers or other employees who are frequently out in the community. Instruct them to identify the locations of businesses that do not appear on the list;
- periodically request lists of “new sales and use tax permit holders” from the Comptroller’s office. Verify that all new businesses appear on the list after they become operational;
- require retail businesses to provide copies of their state sales tax permits when applying for building permits, certificates of building occupancy, utility connections or other city services;
- report any discrepancies between LGEs’ observations of business activity located in the community and the reports provided by the Comptroller’s office to your local Comptroller field office.
For more information, contact the Comptroller’s Local Government Assistance and Economic Development Division at (800) 531-5441, ext. 3-4679 or visit www.TexasAhead.org.
Partnering for Impact
Local governments can partner with the Comptroller’s office to boost local sales tax collections.
The Comptroller’s office empowers local governments and communities with the information and tools they need to support economic development and create new jobs for Texans. Look for our special “Partnering for Impact” section in each issue, featuring timely, important information and tips for local governments and economic development corporations.
Local government entities (LGEs) can partner with the state Comptroller’s office by creating local sales tax compliance programs. This lets LGEs imposing sales taxes maximize their local sales tax receipts without raising tax rates.
The Comptroller’s office requires all businesses that sell taxable goods or services to obtain a free sales tax permit and to collect and remit sales taxes. The permit application makes the Comptroller aware of new business locations and the jurisdictions for which they collect sales tax. With this information, the Comptroller’s office ensures that businesses remit tax receipts timely and allocates the funds to the appropriate local jurisdictions.
Businesses sometimes either fail to report sales taxes at all or do not report to the benefit of the jurisdiction in which they are located.
Reasons for this failure can include business relocations, errors in completing sales tax applications, misunderstanding the law, fraud or changes in jurisdictional boundaries.
By creating a local sales tax compliance program, local taxing entities can help the Comptroller’s office identify businesses located in their jurisdiction that are not collecting and properly reporting sales tax receipts. This can help local taxing entities capture the local portion of this revenue to their benefit. State revenue increases when previously unpermitted businesses are identified and begin to pay state sales tax on their sales.
A well-managed local sales tax compliance program can help keep both the state and local budgets in the green. TR