Consideration and Approval of Write-Offs: Delinquent and uncollectable Transaction Privilege (Sales) Tax accounts for Fiscal Year 2016. (2016 Transaction Privilege (Sales) Tax Account Write-offs)

Generally accepted business and accounting practices allow for the write-off of uncollectable accounts annually. City staff has exhausted collection efforts on the eligible accounts and will no longer actively collect them. Where possible, City collection efforts include contacting credit agencies to identify debt owed by taxpayers, recording tax liens against property, and seeking recovery through the Arizona Department of Revenue's debt set-off program per A.R.S. Section 42-1122. Also the City will not do business with delinquent taxpayers (purchase goods and services). As a result, debt which has been previously written-off is occasionally paid some time later to clear a taxpayer's outstanding debt. Pursuant to state law, taxpayer delinquent account information is not subject to public release unless otherwise a public record (e.g. recorded property tax liens).

Each year, the City anticipates that there will be uncollectable transaction privilege (sales) tax accounts and reserves an amount at year end for these accounts.  The current allowance for uncollectable account for sales tax is $195,000.00.  The amount requested to write off is below this allowance.

COUNCIL GOALS:
8) Improve effectiveness of notification, communication, and engagement with residents, neighborhoods and businesses and about City services, programs, policies, projects and developments

No

• Authorize the write-off of uncollectable transaction privilege (sales) tax accounts.
• Do not authorize the write-off off uncollectable transaction privilege (sales) tax
accounts and continue collection efforts.

Before any account is eligible for write-off, staff must initiate collection efforts on each account after it becomes delinquent. When collection efforts are exhausted, the account is eligible for write-off. 
 
In FY16, the City estimates receipt of $49.6 million in transaction privilege (sales) taxes and franchise fees. The write-offs are 0.3849% of the total estimated amount of revenues.
 
Pursuant to state law, taxpayer information is confidential and information is not subject to public release. 

Transaction Privilege (Sales) Tax Account Write-Offs (6 Year History)

Write-Off Year	Amount of Write-Off	Annual Amount Collected	% of Amount Collected
FY 16	$191,163.45	$49.6 million	0.385%
FY 15	$94,271.80	$40.6 million	0.232%
FY 14	$140,569.91	$35.3 million	0.400%
FY 13	$100,866.05	$34.4 million	0.293%
FY 12	$113,481.22	$33.0 million	0.344%
FY 11	$109,121.32	$31.1 million	0.350%

 

Staff, using billing statements, letters, and telephone calls, has worked the delinquent accounts prior to write-off.

It is sound financial management practice to reduce assets to reflect their true valuation. Failure to write-off accounts deemed uncollectable overstates the asset value of the City.

Inform. Yearly write-offs ensure that the City is following generally accepted business practices.

None.