Many cities might not think that improving alcohol excise tax collection helps build better bridges within the community, but that’s what City Clerk Cynthia Geyer experienced in Hiram after reaching out to restaurant owners. By straightening out what was previously a complicated, reactive process, Geyer says Hiram has collected over $9,000 in previously unpaid alcohol excise taxes. But more importantly, what she learned from the audit process will increase collections in the future.
Through appeals, the city was able to clarify how the tax collection process worked during positive face-to-face meetings with restaurant owners. In addition to improving the overall process and building better relationships with licensees, the city also provided a value-added service to its alcohol licensees and educated city staff on how to better monitor the tax going forward.
For cities struggling with their alcohol excise tax collection (or who handle it too reactively), Geyer's insights will be useful in helping to evaluate ways to collect more revenue and simplify the tax collection process for everyone involved.
What kinds of challenges were you facing with your alcohol excise tax collection?
Geyer: When I became city clerk, the biggest challenge I noticed was that we had a very small staff that had trouble keeping up with the complexities of this tax. At that time, alcohol reporting was only a matter of receiving and depositing checks without understanding much about what we were collecting. Then we began to notice that some very busy restaurants weren’t paying much in taxes. That really alerted us, and we began to ask, “Are we evaluating our tax collection correctly? Do we need to train our alcohol retailers better so that they can report these taxes correctly?”
How did GMA specifically help you with these challenges?
Geyer: Prior to the alcohol excise tax audit, GMA had helped us with our hotel-motel tax recovery. We were ready for a similar process with our alcohol excise tax situation. First, we pulled the previous 36 months of alcohol excise tax data. With that data, GMA created a snapshot that included a general view of various trends. Previously, we did not have that information readily available to us. For example, GMA took 36 months of data, not only looking at alcohol retailers, but also alcohol wholesalers. Wholesalers are a significant part of excise tax revenue, and we had trouble tracking this data before. Now, it was easy to access and track all of the relevant tax information.
After the initial audit process, we were able to understand and track trends about tax payments on an ongoing basis. We established averages to help us note when retailers and wholesalers were under-reporting or over-reporting. We’re so much more in tune with what revenues they should be producing for the city.
What results have you seen from this service?
Geyer: Not only has this service helped us better conduct our day-to-day tax collection at city hall, but GMA also facilitated making contact with all 22 alcohol retailers in Hiram. We talked to these retailers on a level that we’ve never reached before. Previously, we just collected taxes from them. If they had a question, they would call us. Then, we began to acquire more detailed information from GMA: How much alcohol was being purchased on a monthly basis, how much restaurants were expending and documenting on liquor sales, gross food sales, etc. While larger establishments already had this data figured out, I think many of our smaller retailers did not realize that we had access to such detailed data to help us evaluate their excise taxes.
Of the 22 alcohol retailers in Hiram, 10 received letters of commendation for accurate tax reporting. Then we found 10 establishments with deficiencies, and we will collect almost $12,000.00, after appeals, in deficient taxes as a result of the audit. Four of the owners came in and met with the city to identify better ways of tracking their alcohol sales so that their excise tax reports are more accurate. As a result, the entire process—from city hall to our retail owners and general managers—has improved our excise tax collection at Hiram.
So this process really helped in building better relationships with alcohol retailers?
Geyer: Yes, it’s been really positive. A few small business owners of local restaurants don’t have an accountant doing this kind of tax reporting. The owner is the accountant. So, we’ve had a number of them meet with us and review the entire process so that they have a much better understanding of what’s required of them. No establishment has been negative or contested anything. We’ve worked very well together.
That positivity resulted from GMA’s process. They provided clean data that was well-presented and easy to understand. The restaurant owners could not dispute it. We made sure to meet with GMA and have them explain the calculations and formulas that they used to calculate the tax for each monthly period. We were able to pass that information along to the owners. It was very transparent and understandable. No one was left wondering how the city came up with its numbers.