How does $88K in Carbondale use taxes go unpaid?
July 8, 2010
CARBONDALE – Town trustees in Carbondale want some answers as to how nearly $90,000 in new construction taxes went uncollected over the past three years.
According to a June 28 memo to the town board from Carbondale Community Development Director Doug Dotson, use taxes on 10 new residential and commercial buildings completed since 2006 were not paid.
The unpaid taxes range from a little more than $3,000 in some cases to more than $29,000 in one instance involving a downtown mixed-use building that was completed in 2006, for a total of about $88,500.
A use tax is a 3.5 percent tax the town of Carbondale levies on construction materials purchased outside the town limits, but used on projects in town. The tax is typically paid at the time a certificate of occupancy (CO) is issued, Dotson explained in his memo.
In most of the cases where taxes were not collected a final CO was never issued, although the buildings have since been occupied, either by renters, or in some cases after being sold to new owners.
Dotson said the owners and/or contractors have been contacted multiple times to resolve the CO and use tax payment issues.
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The problem first came to light in the town’s annual audit, which caught about $55,000 in uncollected use taxes. Town staff investigated further and discovered the additional cases where taxes were not paid for recently completed buildings.
“This is bad, not just in light of the economy, but the fact that we laid off real people with real families, and this is real money,” Carbondale Mayor Stacey Patch Bernot said at Tuesday night’s town board meeting when the matter was discussed.
The town, as part of its 2010 budget, was forced to lay off four employees and has left some vacant staff positions unfilled.
“This is a big problem, and I’m not so confident it’s going to be an easy fix,” Trustee Elizabeth Murphy said. “There’s a lot of money on the table here, for the town as well as to go back to these people who owe money. Frankly, it’s embarrassing for the town.”
Town Manager Tom Baker said it’s ultimately the town’s responsibility for collecting the use taxes once a new building is complete, as well as ensuring that a CO is issued before it’s occupied.
A new software system will allow the building department to better track construction projects from the time a building permit is issued through to completion, both he and Dotson said.
The town has had the software for some time, but it was not fully implemented due to some technical and training glitches, Dotson said.
Trustees requested that a certified letter be sent to those building owners and contractors that owe taxes requesting that they pay up. However, they want some questions answered in the meantime to fully determine how the failure to collect the money occurred in the first place.
“I’m concerned about the capabilities of the current building staff,” Bernot said. “We can’t really act until we know what we’re dealing with, and who’s at fault.”
The board asked town staff to report back with some answers at the July 13 meeting before deciding how to proceed.