Agmt21 MuniServices SUTA Continuation Agreement

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Permitization Audits, which are to detect, document and assist in correcting errors. However, MuniServices QDR audits focus on those accounts where MuniServices observes a substantial decline in the SUTA revenue allocation for a particular business entity in a given quarter. Every three months, the City and MuniServices receive a QDR from the SBE with the local allocation amount reported by permit number. Timely review of QDR data is critical because cities and counties may only recover misallocated revenue for three quarters prior to the SBE being notified of the reporting error. Deficiency Assessment Audits: Deficiency Assessment Audits leverage MuniServices experience and intellectual property to detect and correct SBE deficiency assessment misallocations when the SBE taxpayer audits for sales and use tax compliance can generate substantial deficiency assessments due to underpayments and/or under collections. In many cases, the City's portion of the deficiency assessment is incorrectly distributed to the State pool, county pools, or other jurisdictions. The Deficiency Assessment Audits ensure the City is given its full share of the deficiency assessment. Use Tax Accrual Audits: Use Tax Accrual Audits involve MuniServices auditing use tax accrual activity to ensure that the City receives its share of the sales and use tax revenue. When California taxpayers purchase tangible personal property directly from out-of-state retailers, the transactions are subject to use tax (rather than sales tax). The Use Tax is often collected by the vendor who in turn remits it to the SBE, with the local allocation typically distributed statewide or county -wide through the pools. However, under certain conditions, the seller must allocate the local tax by situs or the purchaser may elect to self -accrue the use tax and remit it directly to the SBE. In these cases, the local portion will come back to the City in the same manner as sales tax. Accounts Payable Audits: Accounts Payable Audits enable MuniServices to prepare the documentation to facilitate the issuance of a direct payment permit (use tax) to the City and provide assistance in preparing and filing the tax returns. MuniServices accounts payable audits will include, upon request by the City, a review of the City's purchases to identify opportunities for the City to capture the 1% local tax on purchases subject to use tax. Use Tax Audits: The Use Tax Audit services are designed to not only capture use tax revenue through the review of past purchase activity by the businesses in the City but to assist in establishing new processes and procedures designed to prevent the pooling of these revenues and increase the direct allocation to the City. The Use Tax audits focus on identifying taxpayers purchasing tangible personal property directly from out-of-state retailers where the transactions are subject to use tax (rather than sales tax) which is often collected by the vendor who in turn remits it to the SBE, with the local allocation typically distributed statewide or city-wide through the pools. These audits include proprietary techniques that are used to identify purchases made by businesses located in the City from out-of-state vendors that are in excess of $500,000. The local tax for these transactions is typically allocated through the statewide or citywide pools however MuniServices' audits work to redirect the local use tax allocation to the City. Additional use tax audits can focus on the practice of "Use Tax Accrual" in certain conditions where the purchaser may elect to self -accrue the use tax and remit it directly to the SBE, in which case the local portion will come back to the City in the same manner as sales tax. This can involve both purchases made by the City itself or working directly with businesses and construction contractors and developers to establish the practice of self -accrual and direct remittance of the use tax to the SBE. This can also involve assisting the City and the taxpayers where applicable, in obtaining a Direct Payment Permit to further assist in this practice to enhance the City's revenues. ATTY/AGR/2015.101/MUNISERVICE LLC ATTY/AGR.2020.268/MuniServices LLC (Page 27 of 35)