City files first tax suit against local business

By: 
DARRELL JACKSON, Glendale Star Staff Writer

Vicki Rios
Glendale Budget
and Finance Director

“To my knowledge, this is the first time the City of Glendale has done this,” Rios said. “When I was in Phoenix and Peoria, I was involved in a number of these and it is what cities do.”

The City of Glendale is cleaning up its sales tax process after the State of Arizona began collecting sales taxes from businesses nearly two years ago and it is focused on collecting delinquent accounts.
For the first time in the city’s 108-year history, the city has filed a lawsuit against a downtown business for back, unpaid privileged taxes.
Privileged taxes are more commonly known as sales taxes, a tax levied in exchange for a privilege or license granted to the taxpayer. Arizona’s transaction privilege tax is a gross receipts tax on business.
“Most businesses must report their taxes and file with the state by the 20th of each month for the previous month’s sales,” Budget and Finance Director Vicki Rios said. “Each business, since late 2017, files all the taxes and they are collected through the Arizona Department of Revenue and they process them and pay the city the following month.”
Rios said, for example, if a business makes sales in December, it must file with Arizona Department of Revenue by the 20th of January, and the city is paid what they are due in February.’
“So there is a delay in getting payment, but it is a fairly new process that we are all working through together,” Rios said.
The city contends it is owed $81,095.15 in back taxes, interest and penalties in the suit, filed by the city Oct. 2, 2018, against a downtown business for taxes owed from December 2012 through December 2016.
The lawsuit accuses a local business of, “ow(ing) plaintiff (Glendale) privilege tax and fees past due and owing for the time period of December 2012 through December 2016 in the amount of $44,921.88.”
Rios was quick to point out that this was the first time in city history that she can recall that it has gotten to the point of filing suit against a local business.
The suit, filed in Superior Court for the State of Arizona Tax Court, comes as City Hall officials are grappling with a number of businesses that owe the city more than $1,700 in back taxes, prior to 2017.
Since late 2017, when the state took over collection of sales taxes from businesses, the city has participated in a pilot program with the Arizona Department of Revenue (ADOR) to where city staff can review tax cases since then by using state processes.
“The state is running a pilot program, which Glendale is involved in, to allow our collection people to collect on accounts through the states processes,” Rios said. “Our staff has to use state process, procedures and practices, as well as go to state facilities to use their computers for delinquent accounts that have occurred since the state took collection and we are allowed through this pilot program to collect on them.”
Attorneys for the city file tax lawsuits against businesses only as a last-ditch effort to recoup money from companies that repeatedly fail to pay.
“To my knowledge, this is the first time the City of Glendale has done this,” Rios said. “When I was in Phoenix and Peoria, I was involved in a number of these and it is what cities do.”
Rios was unsure why it took the city so long to file this case, since it is attempting to recover taxes from 2012 through 2016.
“The reason this certain case took this long, it is hard to say why it got to this point,” Rios said. “Most businesses, when a collection attorney contacts them, either pay the back taxes or set up payment plans.”
When she worked in other cities, Rios estimated that out of 100 cases, approximately 20 will get to the point of filing suit, and of those, if it goes to court, the city prevails on most if not all of them.
“We are talking about sales taxes, so if it gets to that point, it has probably been researched and discussed and taxes are taxes, you can’t get around them,” Rios said.
While discussing tax processes, Rios said the city sent 51 accounts to an outside collection attorney, Berthune & Associates, for review in collecting the delinquent accounts.
The city sent 51 accounts to them with the lowest at $1,700 and the high being $134,000, with Rios saying they used a certain criteria for deciding which businesses to file cases against.
“Our department and attorneys look at every account and we make contact with the business owners and try to arrange payment or set up payment plans with them,” Rios said. “Once it gets to this point, attorneys look at the response when business owners are contacted and if they set up payment plans and if they have assets, we can get such things as liens against them to collect from.”

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