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Eye on Sedona Finance with City Manager Tim Ernster

Sedona AZ (July 11, 2012) – This Eye on Sedona article is written by Sedona City Manager Tim Ernster and submitted by the City of Sedona Arizona:

Recently, there have been some expressions of discontent in reaction to the City’s attempts to collect thousands of dollars in delinquent sales taxes and wastewater fees from a few businesses in Sedona. The comments suggest that the City is being too heavy-handed with businesses and that its actions may possibly force businesses to close. This article will attempt to explain the City’s rationale behind its efforts to collect delinquent sales taxes and wastewater fees.

The City has been working very closely with the Sedona Chamber of Commerce, the Main Street Program, the Lodging Council and the Gallery Association to assure that there is a “level playing field” for conducting business in the community, and that all businesses contribute equally in paying State and City sales taxes. A frequent complaint that we hear from the business community is “the business down the street is not paying sales taxes and I am, and that isn’t fair.” When certain businesses purposely do not pay sales taxes or wastewater fees, it creates two problems for businesses and residents: 1) it gives businesses who are illegally not collecting sales taxes an unfair competitive advantage over businesses who are collecting and remitting sales taxes as required by law; and 2) it creates a situation where all other businesses and residents in Sedona are essentially subsidizing the businesses who are not paying sales taxes and wastewater fees.

During the last two years, the City, with the involvement of the business community, has begun conducting sales tax audits, established a business license requirement for anyone doing business in Sedona, and passed a new ordinance essentially stating that no permits or licenses will be granted to businesses who are in arrears on any fees or taxes owed to the City. The City attempts to work with businesses that may temporarily fall behind in their payments by negotiating realistic payment plans, and, where justified, waiving penalties.

Businesses that are delinquent on their city obligations typically fall into three categories: 1) Businesses that are almost always current on their payments to the City. This constitutes the majority of businesses in Sedona; 2) Businesses that fall behind thirty to sixty days in their payments, but almost always get current. These businesses may be experiencing temporary downturns and may be forced to delay their payments until they have the necessary cash flow to catch up. As a practice, we try to work with these businesses as long as they are acting in good faith; and 3) Businesses that are habitually in arrears, and blatantly refuse to pay any wastewater fees or sales taxes. In these cases the City is compelled to file liens against their property, deny requests for City permits or licenses, and possibly take legal action which may include criminal prosecution.

In the past, some of the worst violators have owed the city $25,000 or more in back taxes and wastewater payments. In one particular case, a business requested the City to approve its liquor license application, and the request was denied based on the fact that the business had not paid any wastewater fees since it had opened, and had only remitted one month of sales taxes since it opened. In order to avoid serious consequences, the business owner entered into an agreement with the City to get current on the back taxes and fees and is currently making payments. As a result of the business working with the City to pay the taxes and fees in arrears, it was able to remain in operation and ultimately obtain a liquor license.

When businesses do not pay their fees and taxes, the rest of us subsidize their operations because they are not paying their fair share for the services we all receive from the City. In some cases, businesses are charging customers sales taxes but not remitting them to the State or the City. This is a criminal offense. In order to detect such violations, the City has been conducting random sales tax audits.

The majority of businesses in Sedona pay their taxes and fees, and are thereby contributing their fair share to support essential city services. It’s the City’s policy to work with businesses and residents and at the same time to be fair and consistent in our enforcement. The business community and the residents expect fairness and consistency on the part of the City in its collection of fees and taxes. They also, however, expect that individual businesses will make every effort to timely pay their taxes and fees and thereby contribute their fair share to the fiscal health and viability of this great City.

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2 Comments

  1. Steve says:

    more bogus justifications for increased fees & high paid jobs in a depression

  2. A. Koniarsky says:

    ~Steve~

    I beg to differ with you.

    Collecting delinquent sales taxes, business license taxes and wastewater fees from businesses is something that every municipality in Arizona and the rest of the nation has been doing for many years, as required by State and Municipal laws. It’s the cost for doing business in our community. The proceeds from these fees go into paying the cost of the services being provided to our local businesses, instead of imposing additional taxes for the non business community in Sedona so that they could subsidize the businesses who are delinquent. Unfortunately for the City and fortunately for the delinquent local businesses, those who were delinquent were able to get away with it scot free…till the City of Sedona wisely decided to pursue this matter further and collect what was due and deny any city permits to those who were in arrear.

    I compliment our City Manager, Tim Ernster, and his Assistant City Manager, Karen Daines, for going the extra mile to explain to us why the City is doing this.

    Collecting fees have and will never be popular with those businesses that have not paid what was legitimately owed to the City of Sedona. Instead, they were subsidized by the rest of the businesses that did what they were required to do, as well as the rest of the local tax payers. Shame on those who took advantage of the City’s good will and it’s time that you did your share!

    No Steve, the article by Mr. Ernster was NOT “more bogus justifications for increased fees & high paid jobs in a depression.” As a local taxpayer I am extremely satisfied that he and his staff are upholding the law and doing exactly what they were hired to do. Keep up the good work!

    A.Koniarsky
    Sedona, AZ

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