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City to City: Flowery Branch Uncovers $30,000 With Alcoholic Beverage Excise Tax Compliance Audits

February 10, 2015
The City of Flowery Branch, Georgia conducted not one but two audits within the last few years that uncovered a combined total of $30,000 in unpaid alcoholic beverage excise taxes owed by mixed drink licensees. For a small city like Flowery Branch, that’s a lot of money. That’s why it makes sense to Melissa McCain, City Clerk of Flowery Branch, to invest in an alcoholic beverage excise tax audit every few years to make sure that wholesalers and retailers are paying correctly, and on time.

In this interview, McCain discusses how an alcoholic beverage excise tax audit can work painlessly, how GMA’s service saved her staff many hours of time, and how investing in these regular audits easily paid for itself—and then some.

Melissa McCain
What kinds of alcohol excise tax challenges were you facing?
We’re a small community, and so the number of Flowery Branch businesses that pay an alcohol excise tax are low. But we looked at some of our excise tax returns and noticed that some of the upper scale businesses that we expected to pay more excise taxes instead had fairly low returns. That was a red flag, and we wondered if people within those businesses weren’t reporting the taxes properly, especially because some smaller businesses paid more taxes than some of the bigger businesses.

What have been the most beneficial aspects of GMA’s alcoholic beverage excise tax compliance service that have helped you the most?
An audit process is always scary. When you tell a business that you’re doing an audit, people can sometimes get defensive. They hear the word “audit” and think, “We didn’t do anything wrong!” And we at the city even get nervous because these are people who we often see every day. But it was hard to have an issue because GMA was so knowledgeable about how the alcohol excise tax calculations worked. If a business had an issue, question, or concern, GMA was very willing to explain the alcohol excise tax procedure and go over the audit findings. GMA took a lot of the “audit scariness” out of my hands and communicated directly yet professionally with any upset owners.

As an example, one of our businesses experienced an issue because a hard cider was reported by one of our distributors as a distilled spirit. GMA talked to the business owner and figured out that the percentage of alcohol in the hard cider was actually lower than the percentage of alcohol in what’s defined as a distilled spirit. As a result, GMA changed the reporting to a malt beverage instead of a distilled spirit, and that helped the business’s numbers when we conducted the second audit. This situation shows that GMA is not out to “get” the business owners. GMA instead does what’s right and helps businesses if data is reported improperly. Plus, GMA was very accommodating, often making calls and sending emails after normal business hours.

Did GMA also help save you staff time?
Yes. We have 35 employees, most of whom work in public safety, the wastewater treatment plant, and public works. At City Hall, our utility billing clerk does not have any time to look into alcohol excise taxes. Our tax clerk handles business licenses, city taxes, insurance taxes, and the day to day operations of people coming into City Hall. , There is no way that we would have the time to go through three years of documents and do the calculations. GMA definitely helped us save time, and our costs were a quarter of what we received in return, so it paid for itself.

Elaborate more about what results you saw from this service, including the bottom line benefits.
In each of the two alcohol excise tax audits, we had three deficiencies. Only one of the deficiencies in the second audit was a repeat deficiency. It shows that the other two businesses have been educated about pouring and corrected any issues during the first audit. Once a business is aware of a deficiency, they pay more attention to pouring and even help catch reporting deficiencies from wholesalers, such as with the hard cider example above. Plus, GMA’s service helps our business owners see where there is loss and indicates possible issues behind the scenes. Perhaps employees are walking out the door with bottles, overpouring, or not charging for what they’re pouring.

We’re also financially helped by GMA’s service. The first audit found $14,000 in funds owed to us. For a small city like us, that’s significant. For the second audit this past year, we gained $16,000 in funds owed to us. With an uncertain economy and our council recently cutting our business license fees, every little penny helps. That’s why it was good to do a second audit as a housekeeping item. I think we’ll make the auditing a routine task every few years.

For cities with similar challenges, what would you say to them about the importance of dealing with alcohol excise tax issues?
The alcohol excise tax is something that’s already in a city’s ordinance, so it’s something that cities need to enforce anyway. GMA will take care of any communications about sticky issues or explaining to businesses how the calculations and formulas work. As for costs, we’ve come out over $10,000 ahead on each audit. For much bigger cities, I imagine that returns would be much higher.

Plus, it’s just too hard for most city staff to handle alcohol excise taxes on top of everything else. GMA made the process really effortless and a benefit to us both times, and we’ll continue to do audits not only to keep our businesses accountable but to keep us accountable. I always point out to businesses that these audits help them keep a handle on their employees and make sure they’re doing right. One bad instance, and they can possibly lose their license. And it also keeps the wholesalers accountable. It’s a win-win for everyone.
CONTACT US ABOUT THE City to City: Flowery Branch Uncovers $30,000 With Alcoholic Beverage Excise Tax Compliance Audits
As your municipal advocate, GMA created this service when we learned that many municipalities typically did not receive the entire alcoholic beverage excise taxes owed them from mixed drink licensees. Knowing that cities critically need all of their owed revenues in tough economic times, we got to work and provided expertise, professional reviews, and seminars for both city employees and retail pouring licensees to help you collect those taxes.