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Butkovitz Finds 80% Non-Compliance with Sales Tax Laws

For Immediate Release:      
Feb. 16, 2011

Contact: Harvey Rice

Butkovitz Finds 80% Non-Compliance with Sales Tax Laws

Click here to view report

PHILADELPHIA – City Controller Alan Butkovitz today released an investigative report entitled, “Tax Discovery: Sales Tax Cross-Checking,” that found almost 80 percent of sampled businesses not licensed for a state sales tax were in operation but were not paying the state tax.

The Controller's Office cross-matched 144,014 Philadelphia-based businesses having business privilege licenses against a list of state sales tax filers to create a spin-off list of Philadelphia-based businesses that were not on the state's sales tax list. A random sampling of 25 businesses in four specific categories, which included grocery stores, auto-repair shops, bars/restaurants and retail enterprises, was conducted to determine how many of the 100 different businesses were paying sales tax. 

After researching city business tax filings and conducting on-site observations, the Controller's Office found 80 percent of the total sampled businesses failed to pay state sales tax for the period July 1, 2009 through June 30, 2010.

“We initiated this innovative method of cross-checking state and city records to determine if and to ensure that all businesses are collecting and paying all appropriate state sales tax," said Butkovitz.  

The City raised its sales tax from seven to eight percent in October 2009.  The state keeps six percent, and remits two percent to the City.  Philadelphia is relying on an anticipated $242 million in sales tax collections to meet its revenue projections for the current FY2011 in order to maintain a balanced budget.

In releasing today’s report, the Controller’s Office sent a letter to the Pennsylvania Revenue Secretary Daniel Meuser advising him of their findings and asking for cooperation in bringing all businesses in Philadelphia into compliance with state sales tax laws.

"As the Commonwealth’s new Acting Secretary of Revenue, I would welcome your department's cooperation in working with my office and using our findings as a vehicle to help ensure that all monies owed to the state and city for sales tax are collected," said Butkovitz.

"I would request that your office review the enclosed list of what we believe to be tax evaders and bring these businesses into compliance with state sales tax laws."

In addition to detailing the findings of the Controller’s tax discovery investigation, the report also examined the 1,000 Philadelphia businesses that were on the state’s tax lien list and owed the state $13 million. 

Some of the top delinquent businesses and amounts owed include:

Lees Industries Inc. $3,115,770
LS Services Inc. $1,224,831
Philly Car Share Inc. $258,287
Cary’s Oyster House LLC $249,190
Abbe’s Place Inc. $214,842

“It is important that state and local taxing authorities enforce uniform compliance and ensure that all businesses that are required to collect and pay sales tax do so,” said Butkovitz.  “An 80% non-compliance rate is totally unacceptable, especially when the city and state are faced with mounting financial troubles.”


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