The overpayment was caused when an address on a sales tax permit that was originally registered in Bellaire was never changed over to a city of Houston address when the owner of the permit moved, the Comptroller’s Office said. The Comptroller’s Office, as a result, was sending sales tax revenue to the wrong city for the last four years.
A 6.25% sales tax is imposed on the retail sale, lease, and rental of most goods and many services. Sellers are responsible for collecting sales tax from their customers and remitting that to the Comptroller’s Office, according to its website. Then, on a monthly basis, the city of Bellaire receives remittances and reports on those remittances from the Comptroller’s Office, Hofmann said.
“To a casual observer, it might look like the city did something wrong, but in fact I think it’s very clear the city did nothing wrong in this case,” Bellaire city council member Nathan Wesely said during the May 18 meeting.
Information on who the seller is remains confidential, Hofmann said.
“Specific payers and specific amounts are considered confidential, and we don’t share that,” he said. “Businesses don’t want competitors to know their sales data and sales tax payments are considered a part of that.”
Bellaire has yet to receive official notification from the Comptroller’s Office about the repayment, which the city expects to receive within the next couple of months, Hofmann said.
The city discovered the error while formulating financial forecasts factoring in the financial impact caused by COVID-19.
“Our team was digging through the details of sales tax payments and looking for trends by different payee categories,” Hofmann said. “In doing so, we noticed a significant audit adjustment. That obviously caught our attention.”
Meanwhile, Bellaire has begun the process of exploring its available options on how to pay what it owes. According to Hofmann, the city will not need to start paying back the sales tax revenue in fiscal year 2020, which ends Sept. 30.
According to the Comptroller’s Office, similar types of errors to the one Bellaire is facing happen often.
Two options are available for Bellaire in paying back the revenue: a lump sum payment or a payment plan.
Though nothing formal has been formulated yet, Hofmann said his recommendation would be to spread out payments over a few years in order to lessen the short-term financial impact.