by Mike Sharkey
Staff Writer
For years, the Property Appraiser’s Office has collected tangible personal property tax. Those are taxes levied on businesses for such things as office furniture, computers, leased equipment and other assets related to the cost of doing business.
While that tax is a stream of revenue, it’s not a steady stream.
“It’s a self-reporting tax and there’s some thinking that it’s underreported,” said Property Appraiser Jim Overton. “The City Council has asked for a performance audit on our assets. We were going to do it anyway.”
Underreporting works something like this: Bill owns a business and for tax purposes he reports that he has six computers, two fax machines, a copier and a dozen desks and matching chairs. He’s taxed on the value of those assets. However, after a member of Overton’s staff does an audit, it turns out Bill has 10 computers, four fax machines, two copiers and 20 desks and chairs. Bill has been paying taxes on that tangible personal property, but not as much as he should have.
The question Overton and City Council member Jack Webb would like to know is: How many Bills are out there and how much is the City not collecting?
“We are OK with the whole idea of an audit. It might be productive. Some vendors have given us some big numbers that it might yield,” said Overton. “We might be able to capture 20 or so million dollars in untaxed tangible personal property taxes. I don’t think it’s anywhere near that.”
Still, the idea of raising more revenue through tax dollars businesses are obligated to pay is appealing to both Overton and Webb.
“I have been told it’s anywhere from $10 million to $12 million. Those are some of the numbers that have been kicked around,” said Webb. “I do know there is a lot of talk about funding and tangible personal property taxes.”
Overton said the solution is an external audit. Exactly who will do it and who will pay for it is up in the air. Overton said he was prepared to put a request for proposal (RFP) on the street, but the budget issues of late basically eliminated the funding mechanism for an audit that could cost $1 million, but yield much more than that. As of now, Overton believes Council will support paying for the audit. Webb supports the idea of an audit.
“There are two things: one, is the cost a flat fee or, two, is it a contingency fee? That is the analysis,” said Webb.
Right now, Overton does have a department that audits businesses and their tangible personal property. However, that department is too small for the number of existing and new businesses in Jacksonville. Overton’s office performs two types of inspections: a physical field inspection of a business and an actual audit.
The field inspection involves physically driving to a business — or several businesses in an area — and doing an inventory of the tangible personal property and comparing it to what the business’s owner reported. Often, industry benchmarks are used to help determine the accuracy of a business’s tangible personal property.
In audit, which Overton’s office just started performing last year, a business is notified that a representative will be coming in to examine the books and records of that business. So far this fiscal year, about 1,000 field inspections and audits have been performed total.
Webb does think the idea of a citywide external audit of businesses might not go over very well.
“I think there’s gonna be some concern,” he said.
An audit that uncovers revenue could certainly prove worthwhile. According to Overton, the 2010-11 fiscal year budget could prove just as challenging as the 2009-10 budget. He believes the commercial property values will continue to decline while residential values will remain steady. That formula, however, means a decline in property taxes.
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