COLUMBIA is acting not only reasonably but responsibly in requiring businesses to produce tax documents verifying their gross revenue in order to ensure that they pay the appropriate fee when obtaining or renewing their business license.
Some businesses have complained that the city was asking for too much information, leading City Councilwoman Leona Plaugh to raise concerns. “We’re in the era where we’re trying to be more business friendly,” she said. “The reaction I’m hearing from the community is that this is going in the wrong direction.”
We’re all for being business-friendly when it means removing unnecessary red tape and delay that hinder businesses’ ability to prosper, as long as it doesn’t harm the public good or result in unfair, inequitable enforcement of the law. But there’s nothing business-friendly — or taxpayer-friendly — about allowing some companies to skirt the city’s business license ordinance and not pay their fair share while others comply.
City officials have discovered that many businesses have been underreporting their gross revenue, which allows them to pay a lower fee than the law requires. This means that those who provide accurate information shoulder a disproportionately greater burden, and business and individual taxpayers alike must pay more or receive reduced services when everyone doesn’t carry their weight.
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Columbia’s business license office doesn’t have the manpower to audit every application, so it resorted to random checks. Director Brenda Kyzer found underreporting of annual gross revenue in athird of the 586 businesses audited (39 percent in 2008, 28 percent in 2009 and 30 percent in 2010).
Had the city been able to collect from just the audited companies, it would have taken in about $100,000 more yearly for at least the past five years, according to Ms. Kyzer. Who knows how much more underreporting it would have found if it audited all 7,000 permitted businesses.
Given the high rate of underreporting — whether intentionally or mistakenly — this year the city began requesting income tax records from all businesses in order to verify income.
It’s hard to imagine a simpler procedure — businesses simply must provide the relevant page from federal tax forms, not fill out a whole new form — to ensure that all businesses are treated equally and pay their fair share.
But some business owners complained that Columbia was seeking their entire tax return; others worried that the city could not ensure their information is kept confidential.
We certainly can’t claim to know why so many businesses have been underreporting or why some would question the city’s attempt to collect the right amount when extending business licenses; no doubt some are genuinely concerned about their information being handled properly, and the city is duty-bound to make sure it is. But allowing one out of every three businesses to pay less than the law requires while others comply is unacceptable. The last thing the city should do is back away from efforts to enforce the law and collect fees as required.
Wisely, the city is sending letters to permitted businesses clarifying its new revenue-verification procedure. The letters will make it clear that companies need only produce the gross-revenue portion of federal income tax returns to obtain or renew a business license. Businesses that show the information in person do not have to leave a copy with the city.
That is a business-friendly approach that allows the city to enforce its law, ensure fairness and begin collecting hundreds of thousands of dollars it has been missing out on.