City to pay back $463,000: Routine audit uncovers overpaymentAfter an audit by the State Tax Commissioner’s Office revealed a substantial overpayment in local sales taxes by an area business, the city of Dickinson paid back about $462,500 on Thursday.
After an audit by the State Tax Commissioner’s Office revealed a substantial overpayment in local sales taxes by an area business, the city of Dickinson paid back about $462,500 on Thursday.
While tax laws prevent the company’s name from being released, the audit resulted in the business requesting a refund from the Office of State Tax Commissioner.
“The amount of that request was significant,” said City Administrator Shawn Kessel at a Dickinson City Commission meeting at City Hall Monday evening.
The audit on the unnamed company showed taxes were paid on goods and services that were not to be taxed, Kessel said.
In addition, the company paid local tax beyond a $37.50 transaction cap.
“They did not recognize that transaction limit and continued to pay sales tax collections beyond what they were required,” Kessel said.
Cory Fong, state tax commissioner, said the audit was a routine one and overcollections can happen.
“We do refund tax to taxpayers all the time,” Fong said. “How often does it happen? It’s probably more unusual than a situation where the taxpayer ends up underreporting but it does happen. It’s a regular occurrence.”
City officials were made aware of the situation early last week.
“The issue for us is repayment,” Kessel said. “Part of that repayment process is we have three entities and two programs that are direct recipients of local sales tax options.”
Recipients of such local sales tax options are Stark Development Corp., Elder Care and RSVP (Retired and Senior Volunteer Programs).
Kessel said while he has not spoken with anyone from RSVP, Stark Development has agreed to cut a check for the amount they received out of the overpayment.
“Elder Care would like us to simply retain some of their future collections until the amount is paid up,” Kessel said.
The state refunded the money and the city has sent a check back to the state.
“To the credit of the city, we haven’t spent that money,” Mayor Dennis Johnson said. “We felt the best thing to do is just to write the state a check. We have sufficient balances in the two sales tax funds that are impacted here.”
Johnson said both the sales tax 1-percent fund and the 1/2-percent fund have “sufficiently high enough balances” that the repayment will not endanger any present or future obligations.
This isn’t the first time the increased sales tax collection raised eyebrows.
A significantly high sales tax collection in December 2008 prompted the city to contact the State Tax Commissioner’s office on a few occasions, inquiring of any possible issues.
“At that time they had not conducted the audit and were not aware of this situation,” Kessel said. “It came about only after the audit was completed.”
About $386,000 in overpayments by the business occurred in September and October of 2008.
“Our sales tax revenues in 2008 were overstated because of this,” Johnson said.
“The State Tax Commissioner’s office and their staff have been very good to work with on a situation that will impact us moving forward,” Kessel said.