According to an investigative report released by City Controller Alan Butkovitz, about “80 % of 100 businesses sampled in Philadelphia were not paying the sales tax”.
The city increased its add-on to the state sales tax from 1% to 2%, making the total in Philadelphia 8%, in 2009.
Now Philadelphia is relying on an anticipated $242 million in collections in the current fiscal year.
“We initiated [an] 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,” Butkovitz said of the report, “Tax Discovery: Sales Tax Cross-Checking,” which is part of his ongoing efforts to generate new revenues for the city.
The Controller’s Office cross-matched 144,014 Philadelphia-based businesses with business privilege licenses against a list of state sales tax filers to create a list of city-based businesses that were not on the state’s sales tax list. A random review of 25 businesses in four categories, which included grocery stores, auto repair shops, bars/restaurants and retail enterprises, was then conducted to determine how many were paying sales tax.
Philadelphia is owed an estimated $2 million from delinquent sales tax filers that are currently on the state’s tax records, the Controller’s Office reported.
The Controller’s Office has sent a letter to Pennsylvania Revenue Secretary, asking for cooperation in bringing all businesses in the city into compliance.