Avenu’s Vice President of Tax and Auditing Services, Jonathan Gerth, is bringing his expertise to Opelika, AL on Aug. 15 for a one-day business workshop in partnership with the Opelika Chamber of Commerce. Titled “Everything You Want to Know About the Collection of Sales Tax in the City of Opelika,” the one hour seminar is designed to educate local chamber members and potential chamber members on topics such as municipal business licenses requirements, how municipalities apply rental taxes, and the Supreme Court’s ruling regarding sales & use tax. Interested parties are encouraged to register online. Registration is $10 for Chamber members and $15 for prospective members. Lunch will be provided.
On June 21, 2018, the U.S. Supreme Court ruled that internet retailers can be required to collect online sales tax, even in states where they have no physical presence. The landmark decision, South Dakota vs. Wayfair, Inc., reverses a 1992 ruling and can result in a greater revenue source for state and local governments. As explained in this free Avenu webinar held right after the ruling, there are still uncertainties that need to be worked out. Below are highlights from the presentation that inform local government leadership about online sales tax, its revenue potential and what must or may happen before those funds are realized.
It’s been estimated that state and local governments lose nearly $13 billion per year.
Consumers are increasingly choosing the convenience and savings of online shopping. However, if those purchases were made at brick and mortar stores, the sales tax revenue that governments would collect amounts to as much as $13 billion according to the federal General Accountability Office. Having an online sales tax will allow states, cities and counties to collect this money. All governments struggle with pension, operational and other costs, and raising taxes is not an easy option. This makes online sales tax a sound choice under the right circumstances; retroactive tax collection is not permitted.
The ruling includes protections for small online businesses.
The court specified that its ruling was applicable to businesses with more than $100,000 in sales or more than 200 unique transactions per year. This may provide some relief to small, independent online retailers that will have a more difficult time adjusting to a new tax code.
Congressional Action/Implementation Moratorium.
Some stakeholders are advocating for Congress to create a six-month moratorium on sales tax collection to help businesses comply with different state statutes. Therefore, a like outcome is that some states will need to modify their current legislation to comply with the decision. If states enact laws perceived as limiting interstate commerce, then there is a strong chance that Congress will draft a federal standard. There is no timeline for this to happen.
Implementation and Timing.
Several states are issuing guidelines and implementing these new rules, so this will take time. It is still possible that there will be appeals in the lower courts for specific areas of compliance. Localities need to stay vigilant and proactive to ensure they are receiving the revenue they are entitled to.
Avenu’s friends in the South may have spotted the Avenu booth at the 50th annual Alabama Municipal Revenue Officers Association (AMROA) Summer Conference at The Westin, Birmingham this week. A dedicated partner to revenue administrators around the country, Avenu is thrilled to be a Silver Sponsor of the event and support the professionals who help ensure their municipalities are fiscally secure.
Avenu Business Development Executive Yolanda Watkins Bailey was on site throughout the event, answering questions, introducing Avenu’s tools and services, and listening to agencies needs and concerns when it comes to their financial matters.
“I love getting to meet Alabama’s municipal finance officers face to face and learning what helps them succeed. Avenu has such great resources available and I very much enjoy when we can show that to a local audience.”
View or download our recent webinar by Avenu’s Jonathan Gerth, Esq. on how you can get more funding from the franchise fees you collect from utility providers. Jonathan will cover how you can increase compliance with an ordinance review, pending legal challenges that can work in your favor, and how some fees don’t get included in your payments but should.
This free presentation addresses franchise fees from all categories of utilities:
Discussions will also include specific calculations to show what your franchise fee revenue should be!
Tracy Vesely has seen local government challenges from every angle. From revenue challenges in Kern County to legislative coordination of California courts to risk management for various cities, her experience has set her up to offer sound counsel on government operations and finance. We interviewed Tracy about her background and how it fits with Avenu’s vision.
How did you get into local government?
To fund my college education, I worked for a developer in the commercial real estate market. I loved the job and intended to stay in the field after graduation. However, marriage and a move landed me in county government. My start as a budget analyst in a county administrative office began my winding road to finance director. I never looked back. After 27 years I can tell you it was a great decision to stay.
What kept you in local government?
I like to learn, be challenged professionally, and add value to an organization and community. My career in local government has checked all of those boxes. As a finance director I was involved in all aspects of city service delivery and policy, which has deepened my commitment to public service. During a difficult budget year while I was with the City of Berkeley, a community organization that faced funding cuts gave me a paperweight in the shape of a broken heart to remind me of them as we made budget decisions. It remains on my desk 14 years later as a reminder of the importance of public service and stable finances for public agencies.
How does joining Avenu help you fulfill your personal and professional goals? Why Avenu?
I have always enjoyed the diversity of the work in local government. Now, at Avenu, I have a chance to not only work in diverse areas but across numerous cities in several states. It is a more global vantage point, and a chance to bring value across jurisdictions. Avenu’s focus on helping local government deliver stable revenues and plan for the future aligns with my professional experience and mission.
What are the three big challenges facing city finances in the coming five years?
Sadly, there are probably more than three challenges facing city finances. Pension costs are an obvious and very real challenge as they continue to increase and put extreme pressure on public sector budgets, especially in California. Reducing services to fund pensions is not a desirable remedy, so we must figure out a way to control these liabilities in a sustainable way.
Another challenge cities face is the need to replace and improve aging infrastructure. Years of deferred maintenance, especially during the great recession, has pushed our infrastructure to critical levels. Cities will be forced to improve/repair streets, bridges and other infrastructure assets in a significant way in coming years. Many cities are experiencing infrastructure failures and facing fiscal crises to fund these basic needs. As pension and infrastructure costs rise, cities need to maximize their limited revenues.
Unfortunately, a third challenge is that these limited revenue sources are shifting and no longer providing the level of funding that cities need. Sales tax has historically been a reliable source of revenue growth for cities in most states. Changes in the economy, e-commerce, and an obsolete sales tax base are causing dramatic changes in the viability of these revenues. However, it will be interesting to see the impact of the Wayfair Inc. v. North Dakota Supreme Court case outcome.
How does Avenu help local government address these challenges?
Avenu offers software and services that local agencies need to maximize current revenue streams and maintain core services for communities. Avenu partners with cities and counties, using data analytics and expertise to recover tax revenue and assist with elements of tax administration. Raising or creating new taxes is exceedingly difficult, so Avenu can provide opportunities to assist some aspects of public agency operations to save money. For example, Avenu can take over management of the business license process and deliver a web interface that makes it easier for businesses to acquire a business license while reducing the overhead for a city associated with business license management.
As a former finance director, why would your public agency use a firm like Avenu?
Finance directors are pulled in multiple directions at once. It is often difficult to be an expert in a single topic. Avenu provides a partnership that assists finance directors and city managers with recovering and projecting tax revenues, and informing economic development efforts.
What are the key indicators that cities should look at to assess their fiscal health?
Probably the most obvious fiscal indicator is the health of the general fund. Continued deficits and recurring use of one-time/reserve funds indicates a structural deficit. A depleted general fund reserve and the need to use general fund revenues to subsidize other operating funds are also indicators of distress. It is imperative that cities engage in multi-year forecasting models for the general fund and other key operating funds.
With more pressure on city finances the role of the finance director has become more high profile. What are the key traits needed to succeed as a city finance director today?
A successful finance director needs to do it all. Today’s finance director, while a master of fiscal oversight, must move beyond this traditional role and understand almost all elements of city service delivery. A finance director needs to be a strategist and voice of reason who supports the city manager while working to ensure the city’s fiscal stability. This can be difficult when innovation and available resources do not line up. Finance directors are no longer just in the back office. They are a face and voice of the public agency and it is important to be a good public speaker that is able to communicate complex data in an easy to understand manner. Thick skin and an unflappable nature are helpful traits, too.
To keep providing critical services, cities and counties must recoup losses and collect new sales tax revenue from purchases made online. That was one of the key messages Avenu Senior Vice President Doug Jensen presented last month to the Municipal Fiscal Advisory Committee for the City of San Francisco, a community that’s home to many online and traditional brick and mortar retailers.
“Brick and mortar retail sales are rapidly eroding while online sales are growing,” says Jensen. “Municipalities cannot rely on the growth they expected because much of it is from online purchases distributed through pools or not collected at all. It is hurting the cities and counties that rely on this revenue to keep essential services up and running.”
“Cities and counties are still owed the sales and use taxes from online purchases,” continues Jensen. “Collecting that revenue has become a necessary burden that municipal leaders have to take on to get the revenue they need to ensure their communities are livable.”
Avenu joins many municipalities in supporting marketplace fairness legislation to hold online retailers accountable. Through bills like U.S. Senate Bill 976, online retailers in participating states would be required to collect and remit sales and use taxes. The company also awaits a critical U.S. Supreme Court decision this June that may lead to greater marketplace fairness and the requirement that all online retailers start collecting applicable sales taxes regardless of their physical presence.
“Our goal is to ensure all businesses have prosperous and thriving communities to do business in,” advocates Jensen.