AgdaPkt 2004-02-09 - Laserfiche WebLink

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February 9, 2004 Subject Agreement for Business License Compliance Services Recommendation Authorize the City Manager to execute an agreement with MBIA MuniServices Company to provide the City of Redwood City with a Business License Tax Compliance Program which consists of Business License Discovery and Audit Services. Background In recommending the FY03/04 budget, the Finance Department proposed eliminating funds ($2,000) to purchase a database of businesses located in Redwood City that file income tax returns. This information, which is available from the State Franchise Tax Board, would be used in cross-referencing with the City's business license database to uncover those businesses which are not registered with the City, but are reporting income tax to the state. Given the additional systems programming required to relate the sales tax data with our business license information, and the necessary follow-up the Revenue Services Division of Finance would need to conduct, it has been determined that working with this sales tax data would be labor intensive and costly for the City. This would result in the City risking an investment of a substantial amount of labor in this project, and the return, in the form of additional business license revenue, would be very speculative. The goal of the Business License Tax Compliance Program is to educate the business community of the City's Municipal Code. This agreement includes the provision of Discovery Services and Audit Services. Discovery Services are designed to identify entities subject to taxation by the City that are not properly registered and/or otherwise not reporting fees to the City. Audit Services are designed to identify entities subject to fees which are not properly reporting the full amounts to which they are subject. Staff recommends that the City pursue a business license audit through MBIA MuniServices Company (the firm who performs the city sales tax and transient occupancy tax audits), as this can be accomplished on a contingency fee arrangement under which the City will pay a fee only in the event MBIA recovers any new business license revenue. Moreover, MBIA already has the electronic systems in place to more effectively utilize the information available from the State Franchise Tax Board. Several Council Members expressed a concern about this approach as it appears to resemble using a "private bill collector" to identify businesses operating in the City that are not paying business license taxes. MBIA is in fact a private firm and, if this recommendation is approved, MBIA would in fact be attempting to collect business license