Tonawanda News

October 25, 2012

Town proposes $108,000 payment for back sales taxes

By Jessica Bagley
The Tonawanda News

Tonawanda News — TOWN OF TONAWANDA — Officials are offering $108,000 to settle with the state Department of Taxation and Finance after discovering sales taxes had never been paid on the Youth, Parks and Recreation department’s sales since they began in the 1950s.

“We knew we made a mistake here,” Town Attorney John J. Flynn said. 

The town is requesting a three-year look-back period from the state with help from the law firm of Phillips Lytle, LLP for negotiation purposes. 

“The recreation department added up their revenues from the previous three years, 2009, 2010 and 2011,” Flynn said. “That’s how they came up with the figure.”

The $108,000 is mainly comprised of sales at the town’s two hockey arenas, but also includes crafts sold at playgrounds, golf cart rentals, the auctioning off of vehicles and resale items at the Aquatic and Fitness Center. 

Flynn said the town is applying for the state’s Voluntary Disclosure Program and are waiting to hear back from state officials. 

According to the department of taxation and finance website and spokesperson Cary Ziter, the program allows a taxpayer to report and pay the taxes they owe without penalty.

Ziter also said any government entity is responsible for filing sales tax on items that are “not unique to government” — things like concession stad sales and golf cart rentals.

“A town concession stand sells a hot dog just like Ted’s,” Ziter said. “That’s a taxable item because it’s not unique to government.”

In comparison, the town doesn’t have to file taxes on the cost for providing a birth certificate, because the action is solely a government responsibility.

In respect to the taxable items, Flynn seemed optimistic about the town’s prospects with the state. 

“The state regularly accepts people into the program,” Flynn said. “We are very hopeful that we will be.” 

The limited look-back clause of the Voluntary Disclosure Program allows for a three year look back if the reason for the oversight was “mistake, confusion, ignorance of the law, inability to comply or some other similar explanation,” according to the state website. 

Ziter said the look-back agreement can vary and depends on what the state works out with the taxpayer. 

If the three year period is accepted, almost 60 years of tax oversight will remain unaccounted for. Regardless, the town can’t examine records from before 1995 because a fire destroyed the department’s paperwork. 

The Youth, Parks and Recreation department’s concessions began on a small-scale in the 1950s with the sale of crafts at playgrounds, and in 1992, the Town of Tonawanda Aquatic and Fitness Center began selling merchandise, as well.

Revenue increased in 1997, when the town took over concession stands at the two arenas, and in 2011, assumed responsibility for the beverage carts and stands at Sheridan and Brighton golf courses.

Officials discovered the lapse while doing paperwork for the golf sales almost a year ago after ending a contract with Michael Vishion, whose catering company ran the food stands for four years. 

The abrupt canceling of Vishion’s contract one year before it expired came just a month after Vishion challenged Town Councilman and Don Crangle, head of the town’s recreation committee, for a seat on the board. Although town officials continue to vehemently deny it, Vishion still believes cancellation of his concessions contract was the town’s attempt at political retribution.

Town officials say they hoped to retain more revenue by operating the stands in-house through the Youth, Parks and Recreation department workers. Director of the department Dan Wiles is set to report on this year’s profits at the town meeting Monday. 

Regardless of the town’s true intentions, the process of taking over the golf concessions from Vishion led to officials discovering the sales tax oversight. 

“When they did the paperwork for the liquor license and sales tax, they stumbled upon it and realized that we should have had sales tax for everything else, too,” Flynn said. “We went through the records to try to figure out what the liability was so we can negotiate.” 

Town Supervisor Anthony Caruana made the error public at the board’s Oct. 9 meeting and questioned Assistant Director of Youth, Parks and Recreation Jeff Ehlers on the history of the issue. 

Ehlers said Wiles’ predecessor, Gary Lane, told Wiles the town was tax-exempt and did not have to collect sales tax when Wiles took over the position in 2000.

“No one followed up, no one got a second opinion,” Flynn said. 

Contact reporter Jessica Bagley at 693-1000, ext. 4150.