Mr. Jerry R. Griffin, Executive Director
Association County Commissionen of Georgia
50 Hurt. Plaza, Suite loo0
Atlanta, Georgia 30303
Dear Jerry:
In response to your inquiry concerning the new E-fileE-pay sdes tax system the
Department of
Revenue (DOR) initiated in September of 2006, I believe you will fhd the
fo1loWh.g information.useful. For FY2007, beginnjng July 1, 2006 through
December 31, 2006, gross sales taxes collected by the. state have increased
7.8% or $382 million to $5.266 billion. SimultanmuSly,
aggregate sales tax distributions to local governments have jncrwxd 17,3 % or
$353 million to
$2.394 billion. Historically, this relationship has generally been equivalent.
In FY2005 and
IT2006 the increase was approximately 11 % each year through the December
repodhg period.
I understand one of your concerns is that some jurisdictions have reported
distributions lower
than they had forecast. On the other hand, it is clear from the above
information and as reported
in the DOR monthly revenue news releases that distributions in aggregate have
been strong to
date. We believe that if there is an unexpected variance, the major cause is
related to the new Effie
system that sales tax payers u f i e when they meet the threshold requkment to
use the
system and those other smaller Et.ailers which have opted to voluntarily use
the system, We
believe that this is the cause for any variances beGwse there have been no
other changes made to
the way we process distributions. We have also taken tax retum!i of major sales
tax payers and
Lalidated that what they prepared on their side reconciles to the data that the
new E-file system
received.
Legacy System
Under tlze old system of sales tax filing and paying, a retailer collects sales
tax this month, files a
return (and hopefully remits wely payment) by the 20h of the following month,
and DOR then
distributes the local portion on the 23Tdo f the next month based on the cutoff
date of the 20*,
The example would be retail collection through Febmcy 20, retailer tax retum
fdbg and paymenr.
With February's informatjon by March 20, and DOR distribution or2 Apd 23 just
after the April 20
filing deadline.
... .... ..
FEB. 8. 2007 3 : 1 3 P M SENT FROM ACCG
,* -. ..). Zage 2
February 5,2007
NO. 1168 Pa 3/4
:r
New E-fiile/E-pay System
Retailers using the new E-file system collect sales taxes in the current month,
and file and pay
electronically by the 20* of the following month. Since paper processing has
been. removd
from these returns, their data is incorporated in the distribution done on the
23d of the second
month miher than being processed over the next 30 days, Consequently, the
distributions related
to these ~mnas= accelerated by a month.
Thh exmple wQdd be retail collection through February 20, retailer tax retum
filing and payment
with February's information by March 20, and DOR distribution on March 23 just
after the Match
20 filing deadline.
The unique aspect of the changeover by taxpayen from the legacy system to the
new system has
meant that some large taxpayers actually had two payments post ifi the same
reporting period h
the fmt month they went live on the new system. This was because one f-llmg and
payment, for
example October, was pmcessed via paper retum in early November and the new
FAle return
for November was processed on November 20 when it was due. Therefore, both the
early
November and November 20 payments were added to the November 23 distribution to
the local
jurisdictions. Furthermore, since a retun and payment is due every month, the
catch up, if you
will, won't be reflected until the next fiscal. year,
To put this in additional perspective, DOR formerly mailed nearly 120,000 sales
tax returns
every month. Roughly 65 % historically came back with emrs that DOR was
correcting which is
obviously very expensive. Under the new system, approximately 10% of all sales
tax filers are
using the system since they meet the mandatory filing threshold of remitting
$5,000 on average
each reporthg period. Tbis has eliminated a substantial amount of errors
needing correction. If
we could lower the mandatory filing -hold to $750 per period, like Alabama has
done, the
quality of information DOR could provide to each jurisdiction would be patly
enhanced. It
would then be valid and accurately representative to break colleGtions and
distfii~onsd own by
NMC (industry codes) and jurisdictions. We can begin doing that with the new
system now but
it is lass than representative if only 10% of the sales taxpayers are using the
system even if they
represent approximately 80 % of the dollars collected.
h an attempt to address your original issue further we are happy to perfom
individual county
analyses much like we have done for bwndes, as well as cities like Valdosta. By
doing this we
can see whether a certain "major" discount retailer had two papbnts post in any
given month or
not. Even in rural jurisdictims, major retailers can remit six figwe sales tax
payments in a given
month. It is also not uncommon for home hnprovement centers and power companies
to post
high five figure payments. Thus having a system changeover month wheE multiple
retailers
may have had double payments post could result in distributions that are
different from what
local govenvnents may have expected.
It would help DOR for any county in question to let us do the analysis for them
to ensum this is
the cause and to determine, if for example, any or all of them have kss than
expected year-todate
numbers versus individual months that didn't meet projections made earlier in
the year or
the pevious year for a particular month.
FEB. 8, 2007 3 : 1 3 P M SENT FROM ACCG
L. - - . < . gage3
February 5,2007
NO. 1168 Pa 4/4
At the end of the day, I have been tolc that DOR collections have been
rec,nciled to dollars
transfed to &e Treasury and local distributions an: up 17.3 % over last year
through Recember
31, 2006. We are also reviewing why gross collections are only up 7,8% versus
the above
increase, Some of the difference is a~butableto the law passed last year that
reduced the
amount of e s h t e d sales tax retailers had to leave on deposit with the
state, These reductions in
deposits have been returned to sales taxpayers in the form of reWs and sales
tax credits,
Please have any jurisdiction concerned about their distriutions contact my
office so that we may
do a E2007 reconciliation by major taxpayer for them. We will s bas much
information as
the tax code allows us to share,
We hme every division in DOR that is integral to this process reviewing the
process to ensure
not ody that we are doing it correctly and that the system is working comctly
but that we can
explab it as well. Please let me know when you would personally like to visit
on this matter.
MSincerely, d ,
Bart L. W a r n
BLG:mb
cc: Tommy Bills, CIFO
Heidi Green, Director, Intergovernmental Affairs,
Sha Hesteer, Director, Local Government Services
Lora Butler, Dkctor, Tax Law & PoIicy
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