The Rutherford County government is interested in a pilot program that would outsource the Tennessee Department of Revenue’s auditing authority to catch companies accused of not turning in sales tax receipts.
The Steering, Legislative & Governmental Committee hosted members of the local state legislative delegation during its monthly business meeting recently. Delegates attending were State Sen. Shane Reeves and State Reps. Mike Sparks and Charlie Baum. Senate Majority Leader Jack Johnson was scheduled to attend but could not make it. A number of local public officials were in the audience.
One topic of discussion was so-called “sales tax leakage,” in which a business allegedly fails to report some of its sales tax. Officials talked about entering into a pilot program with Brentwood-based G2Lytics, a software and cloud-based technology company.
Reeves said he had learned about G2Lytics only while preparing for the committee meeting but added it could be an option. Committee Chairman Craig Harris said G2Lytics wants Rutherford County to participate in a pilot program that could include Williamson County; the committee wants the delegation and Gov. Bill Lee to make sure the county is included.
Mayor Bill Ketron, who is a former state senator, said it would help if the delegates would talk to the governor. G2Lytics is talking to six other states about a pilot, as well as Bank of America, which he said is willing to advance the estimated leaked sales tax revenue to counties in anticipation of it being collected. He said G2Lytics has a proprietary algorithm to detect leakage by looking at factors such as a business’ bill of lading to see if it’s buying more goods than it serves, comparing that to similar businesses.
Sparks said the program sounds like it makes sense.
Ketron said, “It’s about paying your fair share’ it’s not fair to those who are doing it correctly.”
The mayor estimated there is a leakage of about $3.8 million in Rutherford County and $3.2 million in Williamson County.
The state needs to authorize the pilot because the law allows only revenue agents to conduct such audits.
County Commissioner Allen McAdoo asked the delegation if it would amend the “outdated” development tax and allow the county to enact the County Powers Relief Act, which allows a school facilities tax in rapid-growth counties.
Baum said Rutherford County is grandfathered into the development tax, which allows it to charge $1,500 per new home. The Powers Relief Act allows a county to charge $1 per square foot. The Legislature approved the Powers Relief Act in 2006 after a great deal of back-and-forth with special interests such as real estate agents and homebuilders, who agreed to that in lieu of counties using private legislative acts (with goals such as establishing development taxes).
Rutherford County cannot have both taxes, Baum said, and once the development tax was eliminated, it likely would be gone forever due to industry opposition. County commissioners need to decide which tax would bring in more money, he said.
Baum said another consideration is that the development tax collects all the revenue up front, while the Powers Relief Act collects half up front and the rest after the home is built, although there are cases in which builders can get extensions on making the final payments.