HomeMy WebLinkAboutFIN 2022-02-14 Item 1A - Discussion - Contingent-Based Sales Tax AuditCity of Tukwila
Allan Ekberg, Mayor
INFORMATIONAL MEMORANDUM
TO: Finance & Governance Committee
FROM: Vicky Carlsen, Finance Director
BY: Tony Cullerton, Deputy Finance Director
CC: Mayor Ekberg
DATE: February 14, 2022
SUBJECT: Contingent Based Sales Tax Audit
ISSUE
Staff would like to share with the Finance & Governance Committee our intent to enter
into a contingent agreement with Azavar Government Solutions for the purpose of
identifying and collecting misdirected sales tax revenues due to the City of Tukwila but
being allocated to other neighboring jurisdictions.
BACKGROUND
The City of Tukwila receives sales tax revenues directly from the Department of
Revenue (DOR), that has been collected by businesses and remitted to DOR. The City
is interested in answering the question, is the City collecting all sales tax revenue that
they are entitled to receive? Tukwila shares three zip codes with neighboring cities
causing confusing of the correct jurisdiction to allocate tax revenues. Additionally, the
City of Seattle's location code is 1726, Tukwila's location code is 1729. When
businesses enter the City's location code, there have been instances of coding errors,
resulting in Tukwila sales tax being diverted to the City of Seattle. These are examples
of possible sales tax revenues due to Tukwila but are potentially being allocated to
neighboring jurisdictions.
DISCUSSION
Azavar Government Solutions assists municipalities with identifying and recovering
unremitted tax revenue. By utilizing address information provided by the City, and
business and tax id information supplied by DOR, Azavar applies geo-coding
technology to identify gaps and trends in remittance. Example would be identifying
businesses that are being coded incorrectly to other municipalities. Anomalies can
occur when USPS postal codes are used, or annexations are not kept current. Their
geo-coding technology is used to identify the correct jurisdiction a business should be
collecting tax revenue for. This service is provided on a contingent basis allowing for no
out of pocket expense to the City. The recovered revenue is shared by the City and
Azavar for thirty-six months, after which the City retains all of the ongoing sales tax
revenue. Azavar Government Solutions has previously provided their services to local
municipalities including College Place, Newcastle, Issaquah, and Brier.
FINANCIAL IMPACT
No out-of-pocket cost to the City. A specific percentage (40%) of new revenues
discovered through Azavar audit procedures is shared for a period of thirty-six months.
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INFORMATIONAL MEMO
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RECOMMENDATION
No action needed by the Finance & Governance Committee. This is for informational
purposes only.
ATTACHMENTS
None
https://tukwilawa.sharepoint.com/sites/mayorsoffice/cc/Council Agenda Items/Finance/Azavar Informational Memorandum.docx