HomeMy WebLinkAbout5.346 Original ContractMicroflex
2201 SW 152nd St
PO Box314
Seahurst, WA 98062
206 -248 -2650 Fax 243 -6164
December 8, 1998
Ms Yvonne Ziomkowski
City of Port Angeles
:321 East 5th
Port Angeles, WA 98362
fJGCil i. VUiLIG,
Software and Financial Solutions for Government
Ref: Tax Discovery Audit Letter of Agreement Extension
Pursuant your instructions, we are pleased to extend our tax discovery audit services to the
City of Port Angeles. We submit the following letter of agreement for your approval:
Audit Score and GenesaL\ proach
W wv ill :;1'0 a continuous tax discover; ,audit program during which the following taxes,
if applicable to your idly ill be audited:
Sales Tax we will look for additional d .s tax revenues in a number of ways
We will examine your sales tax distribution data to ensure that all returns are
present for each taxpayer and that there are no inappropriate adjustments or
corrections.
We will audit large completed building permits to ensure that contractors and
v..l bcontlactors properly code and report sales taxes due.
For each business license categorized as a retailing business, we will ensure
there is sales tax reporting to the City.
a We will examine private party vehicle and boat sales to ensure use tax is
properly allocated.
2. Business Licenses aiic1 B 0 'S x tole foi: new business licenses and
urtrepoiteca B &tie Mixes IT; '71; s.
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5. 344)
4' e l';311 cross anti,.?? s :;les !los to City business license files to ensure
firm which rz.pCft i ;:thi1 tie City y are licensed and paying age() taxes.
We will cross match business listings from the yellow pages Lo both sales tax
information and Cit y business Eioeei es to ensure these firms are licensed and
reporting sales and B &O taxes
Tax Audit Letter of Agreement with the City of Port Angeles Paae 2
If the City requires its vendors to have a business license and pay B &O tax, we
will cross match vendor data with sales tax and license data to ensure vendors
meet this requirement
3. Utility Taxes we will look for new utility tax accounts in the following ways:
We will make sure the telephone utilities we find when auditing sales tax are
reporting utility tax if applicable.
We compare a master list of all telephone utilities and long distance /cellular
resellers to your utility tax returns We contact those which we do not find and
determine if they conduct business in the City. If they do, we will take steps to
the City.
they report Ct�J�)ro�li idLv taxes to t,11G t.11�.
This tax discovery audit will be done primarily using computer technology. We will work
with you to obtain the information we need from your business license, vendor and building
permit systems. We will use special software to identify accounts for review.
Data we need from the City
We need the following data from the City in a computer readable standard ASCII text (.txt),
Paradox (.db), spreadsheet wk1 or xis) or dBase format (.dbf):
1. Business license data to include at least naive, address, phone number, state UBI
City registration number, business license open date, and coding to identify accounts
discovered by Microflex. This download is needed at least every other month. If you
use Eden software, you can obtain a download program from them at a reasonable
cost.
2. Building permit data for projects with estimated values in excess of $500,000
including value, owner information, contractor information_ including name, address,
UBI city license and any subcontractor information which is captured. If this is
unavailable in a computer readable format, photocopies of the larger permits will
suffice.
3. City vendor file including name, address and whatever tax numbers are captured and
YTD purchases. This data is optional If you are unable to provide it or you do not
require your vendors to be licensed and pay B &O tax, we will not audit City vendors.
4. Copies of your last utility tax returns or a listing of names and addresses of all private
utilities which are paying the City utility tax
Current city map showing city boundaries with street level detail.
Tax Audit Letter of Agreement with the Citv of Port Angeles Paae 3
City Responsibilities
We will make every effort to minimize City responsibilities for the audit program. We will
create all correspondence relating to tax recovery /discovery or new business registrations
However, we need the City to do the following
1. Provide the data described above
2. Provide appropriate City stationery supplies for mailings such as letterhead, windowed
envelopes and any forms used to sign up new business licenses.
3. Pro tax remittance form l. to be used for coll b taxes, if dis
4. Provide new business license and /or B &O tax numbers in a timely fashion for
accounts we discover so we can promptly send back tax mailings.
Provide a method of reporting cumulative revenue received for new utility tax and
B &O tax accounts discovered by Microflex Other cities have included a code in their
B &O system to identify accounts discovered by Microflex and then have used this
code to run a cumulative revenue report for these accounts. We then use this report in
our billing. For the utility tax accounts we may discover, we will ask you to fill out a
form each month or quarter that tax returns are filed for these accounts.
Microflex Responsibilities
Microflex will conduct all aspects of the audit including.
1. Using computer technology to identify potential missing taxes.
2. Act as an agent of the City in contacting the appropriate business or state agency to
determine if taxes are due.
3. Follow -up with the Department of Revenue or directly with the business on audit
exceptions where tax is due. If we are unable to cause voluntary compliance, we will
notify the City which then may initiate legal action.
4. If requested, provide the City with information to update city computer systems with
new information discovered in the audit
5. Provide monthly reports showing the status of the audit.
Tax Audit Letter of Agreement with the Citv of Port Angeles Paae 4
Audit Costs
We propose the following fee structure for New Revenue received as shown in items 1
through 5 below:
1. Missing or adjusted returns for existing sales tax accounts 20% of the actual amount
of tax recovered.
2. New sales tax accounts discovered 20% of all back taxes collected and 20% of new
taxes accrued for a period of one year after the account is identified and begins normal
reporting. This means 12 full returns for monthly reporters, 4 full returns for quarterly
for ie p� rte~_ For example, if the first normal quarterly
l,,G'i 5.;..r� yr ;1 :1�; return annual it ��a For �,n.,uu A i
return for an account discovered by Microflex includes only one month of taxes, then
New Revenue includes one month of the first quarter, the next three quarters, and two
months of the next quarter.
3. New business licenses discovered 10 per license.
4. New B 0 tax or utility tax accounts discovered 20% of all back taxes or fees
collected and 20% of new taxes or fees accrued for a period of one year after the
account is identified and begins normal reporting This means 12 returns for monthly
reporters, 4 returns for quarterly reporters or one return for annual reporters. For
example, if the first norrnal quarterly retui n for an account discovered by Microflex
includes only one month of taxes, then New Revenue includes one month of the first
quarter, the next three quarters, and two months of the fifth quarter.
5 New utility tax accounts 20% of all back taxes collected and 20% of new taxes
accrued for a period of one year after the account is identified and begins normal
reporting. This means 12 returns for monthly reporters, 4 returns for quarterly reporters
or one return for annual reporters. For example, if the first norrnal quarterly return for
an account discovered by Microflex includes only one month of taxes, then New
Revenue includes one month of the first quarter, the next three quarters, and two
months of the fifth quarter.
The maximum Microflex fee for New Revenue from any single new account or audit finding
is $10,000. Our fees are not due until the City actually receives any New Revenue as defined
above.
Term of Agreement
This letter of agreement is effective upon signature of both parties and remains in effect until
terminated by either party with 30 days advance written notification. For new accounts
described in 2, 4 and 5 above whose one year period extends beyond the termination date of
Tax Audit Letter of Agreement with the City of Port Angeles Paae 5
this agreement, the City must continue to identify revenue receipts and pay Microflex fees
until the one year period expires
Indemnification of City
Microflex agrees to save and hold harmless the City of Port Angeles, its officers, agents and
employees from and against any and all liabilities, costs, damages, lawsuits, including the cost
of all reasonable attorney fees, arising out of the negligent performance of Microflex's
responsibilities pursuant to this agreement
We look forward to a continuing relationship with the City. Please sign below and return a
copy us. Meanwhile, please cal If you hc.ve an": questions regarding this agreement
renewal
Respectfully submitted,
Microflex, Inc.
Michael J. Mulcahy
President
Proposal accepted by:
City of Port Angeles
Name
Title
Date
120 Southwest 164th Street
Seattle, Washington 98166
(206) 248 -2650
May 12, 1994
Ms. Yvonne Ziomkowski
City of Port Angeles
P.O. Box 1150
Port Angeles, WA 98362
Dear Yvonne,
Microflex is pleased to offer our services to do a comprehensive tax discovery audit for the City of
P t Angeles.
General Approach to Audit
We will crossmatch STARS sales tax data with city data including transient business licenses,
utility billing, building permits and vendor information to ensure that:
1. Builders are properly reporting sales tax
2. All businesses in the City are registered and paying appropriate taxes
3. There are no obvious miscodings in the existing sales tax revenue stream
Data Needs
We need to get the following data from the City:
City Responsibilities
Microcomputer Software for Public Entities
5. 3/e0
1. Transient business license data including name, address, state UBI and license number.
We understand that this is available on paper.
2. Building permit data including builder's name, address, UBI# and subcontractor information
if available. We understand this is available on paper.
3. Utility billing dzta inckd ?ng name and address for all commercial business accounts within
the city limits. We understand this will be in a LOTUS spreadsheet format.
4. If the City wishes to review its vendors, we will need a vendor list with names and
addresses. We did not discuss this at our meeting. Hopefully, it is available in computer
format but a paper listing would be better than nothing.
City responsibilities for the audit will be minimal except for making the data described above
available. We will create all correspondence relating to tax recovery/discovery for City review and
approval. The City will need to provide us with copies of appropriate ordinances governing city
taxes and a representation letter authorizing us to act as an agent of the City while conducting the
audit.
Proposal to the City of Port Angeles Pape 2
Microflex Responsibilities
Microflex will conduct all aspects of the audit including:
1. Using computer technology to identify potential missing taxes.
2. Act as an agent of the City in contacting the appropriate business or state agency to
determine if taxes are due.
3. Document the results of the audit in a final report to the City.
4. Provide the City with information to update city computer systems with new information
discovered in the audit.
audit, rl L 1
This proposal is to do a tax diawvciv audit, not 1 not a tax Ciiii'�.;t1a�1C6 audit. That That la� is, we MI not review
financial records of businesses to see that all gross sales are reported, etc. What we will do is
aggressively search for businesses which are not properly reporting and paying City taxes.
Costs
Our fee to conduct the proposed audit is 20 percent of new revenue generated up to a maximum
fee of $15,000. If we find no new revenue, no fee is due from the City. New revenue is defined
as follows:
1. Missing returns for existing sales tax accounts actual value of tax recovered.
2. New sales tax accounts discovered one year's tax for the account as actually received by
the City.
3. Other city taxes due one year's tax for the account as actually received by the City. This
would include gambling, leasehold excise, hotel /motel and utility taxes if applicable.
We propose that the audit be conducted over approximately a 60 day period beginning with our
receipt of the necessary data. At the end of the period, we will forward a report to the City
documenting each business or individual account from which new revenue is due. These may be
existing accounts which have miscoded their taxes or new accounts which have not paid taxes to
the City before. We will monitor these accounts for one year. Our fee is due on the first of the
month after the City actually receives the revenues from the accounts we identify.
If this proposal meets with your approval, you may simplify the contracting process by signing
below and returning a copy to us as approval to proceed.
Respectfully submitted, Proposal accepted by:
Microflex, Inc.
ichael J. Mu ahy
President
City of Port Angeles
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