Under the current provisions of the Food and Beverage Tax, amounts received
in payment are automatically applied to the oldest penalties, interest and
tax. Some operators have expressed that this makes it almost impossible for
an operator who gets behind to ever catch up. Even if they pay all amounts
due for a current reporting period, the payment gets applied to the oldest
debt and the operator is determined to be delinquent in the current period.
The current code provisions also create difficulties for staff in collecting
delinquent debts. When an operator becomes delinquent, if necessary, the
legal department takes the operator to court and obtains a judgment on the
debt. The operator continues making tax payments which are applied to the
oldest debt first, arguably to the judgment amount. If the operator cannot
completely pay all the back debt plus currently due taxes, the operator continues
to be delinquent. The city must file a new action on any continuing
delinquencies. If the operator were able to apply the current payments to
period specific amounts, the operator could pay the taxes for current periods
to avoid any new penalties.
The current code provisions provide for a three year period in which an operator
can make a claim for overpayment of the taxes due to the City. This extended
period is lengthy, unnecessary and creates a significant potential workload
for which we are not adequately staffed. The operator is in the best position
to know if the tax they are remitting is too much. Since they are in the
best position of knowledge, a year limitation seems reasonable for making
a claim for overpayment. Extending the period beyond that can make researching
our financial records to evaluate a claim very time consuming. We are therefore
proposing to change this period to one year.
The current code provisions do not provide any funding for audit and enforcement
activities. All funding, including penalties, are distributed to either parks
or are distributed to wastewater for the treatment facility upgrade. The
finance department would like to begin a periodic audit process to provide
operator education and oversight. With appropriate funding this could become
a reality. Since the penalties are generated through the collection process,
they truly are not part of the tax and could be used to fund the audit and
enforcement actions.
AMC Section 4.34.150 provides that all funds received through the tax are
to go to the Open Space and Park program. This is in conflict with AMC 4.34.020
D. Since AMC 4.34.020 already has provisions for disbursement of the tax
receipts, AMC 4.34.150 is redundant and unnecessary. Therefore, it is proposed
to be repealed.
Finally, these issues were brought to the forefront by some operators who
are trying to get caught up on their delinquent taxes, but with their taxes
perpetually being judged delinquent and penalties being assessed, they are
finding it really difficult. The retroactivity of this ordinance was proposed
as a way to get these operators back into compliance with the ordinance.
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