Closing the gaps in business tax collection

Public information is very useful for all sorts of good and valid reasons, though there are occasions like this one where the proverbial too much information did get me annoyed recently. But let’s turn lemons into lemonade, or in this case an article, and hopefully a learning experience.

I’m self-employed with my own home-based business which is registered with my state’s department of corporations. I am also registered with and pay my county and city business taxes.  But this is not true with some of the other people who live in my community, as I discovered while browsing through public records.

One of my neighbors has a home-based business listed with my state’s department of corporations, but the address is falsified. I don’t think this is an honest mistake, given that the business is approximately eight years old and has been through two registered agents. A letter has been left out of the street address. For example, if the street was named (fictitiously) Wheatfield Road, the street name on this person’s state business filing is “Weatfield Road.” For the record, there is no other street in my county other than the one in our community with the name “Wheatfield Road” and there is no such road in my county named “Weatfield Road.”  

Another person living in my community has had a home-based business for the past 4-plus years but has never paid county or city business tax receipts. Using my own business as the basis, I checked on the county and city revenue websites and searched for both my business and this other person’s business. I found my business’ tax receipts history on both the county and city tax websites, but nothing for this other person’s business. In calling the county tax revenue office, they confirmed no tax receipts had been paid for this other person’s business.

Here is what immediately comes to mind.

First, it is obvious that my state’s department of corporations does not do any address verification, even for companies listed within the state. If they did, they would have picked up on the fact that the first business example was using a fraudulent address.

Second, there is obviously no collaboration between the state and the county or city, because in the second example, the neighbor who is not paying county or city business tax receipts does have the business listed with the state on the department of corporations website.

Third, there is no convenient (or anonymous) way of notifying the state, county, or city of any of these transgressions. Trust me, I tried.

Fourth, there is obviously no collaborative effort between the state, county, or city in regards to shared data. A fictitious name filing with the state should be an indication to county and city tax officials that a business is in the formation. Certainly, if a business is paying its annual state filing fee, this is a red-flag that the business should be paying their county and city business tax receipts too.

Bad behavior begets bad behavior. Cities and counties are realistically losing out on thousands, tens of thousands, and perhaps much more in needed and deserved business tax revenue from fraudsters who are cheating the system and who know that they can get away with it. This is an unfair burden on those of us who are paying our business tax receipts.

These are just two problems in my small community in which I am certain there are more … in fact, I know that there are. Imagine how many more absconders there are as the problem gets to be city-wide and then county-wide. This is too much potential revenue to leave aside. Whether it is home-based businesses or larger companies, all businesses should be held accountable to the same rules and requirements in a fair and balanced system of government.        

With AI and advanced software capabilities, the solution is achievable, but requires a collaborative effort between state, county, and city entities. The solution is not to raise tax rates, but rather, to invest in technology, whether it be to upgrade existing systems or implement new systems to aggregate and analyze data. Working together, state, county, and city tax agencies—with leadership from their respective CIOs—can create a fair and effective connected system to ensure that all businesses pay their tax receipts. 

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