Tax payback time for overpaying cities
A recent court decision determined that several Texas cities, including the City of Greenville, had been overpaid in their sales and use tax collections.
Tonight, the Greenville City Council intends to approve a plan for paying almost $2.8 million back to the Texas Comptroller’s Office over the course of the next 30 years.
The council’s vote is included as part of the regular agenda, starting at 6 p.m. in the Municipal Building, 2821 Washington Street. A work session is also scheduled for 5 p.m. today.
In a memo to the council, City Attorney Daniel Ray said a recent Texas Supreme Court decision resulted in the City of Greenville owing sales and use taxes, which were paid by the Texas Comptroller of Public Accounts to the City in error, for a total amount of $2,780,542.81.
“The City proposed terms for a long-term payback agreement, and the Comptroller approved these terms,” Ray said.
Sales taxes are one of the two main sources of revenue, along with property taxes, which feed the City of Greenville’s general fund. A rededication of a percentage of the sales tax revenue goes toward the 4A economic development corporation.
In March 2012, the Texas Comptroller’s Office notified the City of Greenville that it would postpone collection of more than $2.7 million in sales tax revenue. The state agency had previously indicated the city would be required to refund the money, based on a sales tax exemption expanded significantly by the Austin Court of Appeals.
The Texas Supreme Court agreed to hear two lawsuits between the State Comptroller’s Office and Health Care Services Corporation. Former City Attorney Brent Money filed a brief on behalf of the Texas Municipal League (TML), Texas City Attorney’s Association (TCAA) and the City of Greenville to represent the interests of Texas cities and counties in the two lawsuits, amid concerns the issue could cost the State of Texas more than $600 million in sales tax refunds and decrease revenue by approximately $75 million annually.
The Texas Supreme Court ruled in June that Health Care Services Corporation, successor to Blue Cross and Blue Shield of Texas, Inc., could claim a sale-for-resale exemption on tangible personal property and taxable services purchased to fulfill contracts with the federal government to administer Medicare Part A, Medicare Part B, and the Federal Employees Health Benefit Program (“FEP”).
“The amount owed to the Comptroller represents approximately 50 percent of the City’s annual sales tax revenue, and this would cause a financial hardship on the City without a long-term payment agreement,” Ray said.
Under the 30-year payback agreement, the City of Greenville would pay the Texas Comptroller’s Office $7,707.06 per month, or $92,484.72 per year, with the payments to begin Dec. 1.