Westminster City Council
SUBJECT
Title
Approval of California Department of Tax and Fee Administration Agreements for Implementation of Local Transactions and Use Tax (TUT - Measure E Sales Tax).
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publichearing
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From: Erin Backs, Finance Director
Requested by: Administration
Prepared by: Erin Backs, Finance Director
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RECOMMENDED ACTION
Recommendation
A. Adopt a Resolution entitled, “A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WESTMINSTER, CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE AGREEMENTS WITH THE CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION FOR IMPLEMENTATION OF A LOCAL TRANSACTIONS AND USE TAX,” in a form approved by the City Attorney; and
B. Adopt a Resolution entitled, “A RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF WESTMINSTER, CALIFORNIA, AUTHORIZING THE EXAMINATION OF SALES OR TRANSACTIONS AND USE TAX RECORDS”; and
C. Authorize a budget increase to the General Fund for $175,000 account Finance Contractual in order to pay the California Department of Fee and Tax Administration for preparatory costs for implementing the transactions and use tax.
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BACKGROUND
At the March election, the City’s voters approved Measure E, the City’s transactions and use tax (commonly called a “local sales tax”). The tax was also approved by the Council by the adoption of Ordinance No. 2609. Transactions and Use Taxes are administered by the California Department of Tax and Fee Administration (Department) on behalf of the local governments that impose them. City staff have been coordinating with the Department, so that collection of the tax can begin as authorized by law. The proposed Resolutions will allow the city to contract with the Department for services as well as oversee distributions internally. The deadline for submitting fully adopted resolutions is April 12, 2024.
Contracts for Service
The first Resolution authorizes the City Manager to enter into two agreements for service with the Department. The first agreement authorizes the Department to prepare the necessary systems to process the Measure E transactions and use tax revenues. The Department’s costs include developing procedures, programming for data processing, developing, and adopting appropriate regulations, designing, and printing forms, developing instructions for the Department’s staff and for taxpayers, and other appropriate and necessary costs to administer the Ordinance. The Department will submit invoices to the city, which will be reviewed by staff. Preparatory costs shall not exceed one hundred seventy-five thousand dollars ($175,000).
The second agreement with the Department is for ongoing service to regularly collect and allocate sales and use taxes associated with the Ordinance. In this agreement, the Department will directly recover its costs from amounts it collects prior to distribution.
It should be noted that, if a court were to hold the Ordinance invalid or void, the Department would retain all payments for their preparation costs, as well as any funds retained for administration of the tax while it was active. Additionally, any revenues distributed to the city prior to such a court ruling would need to be returned by the city to the Department for rebates or refunds if so required.
Examination of Records Authorization
As sales or transactions and use tax data when shown on a retailer-by-retailer basis is confidential information, the City Council must authorize the Department to share the information with specific individuals. The second Resolution allows the Department to provide confidential sales and use tax data to the City Manager and other officers or employees designated in writing by the City Manager to the Department.
FISCAL IMPACT
Implementation of Measure E by the California Department of Tax and Fee Administration will cost up to $175,000. A budget adjustment in the amount of $175,000 to Finance contractual, account number 21000-43090 from General Fund Reserves is necessary to pay for these implementation costs.
LEGAL REVIEW
The City Attorney’s Office has reviewed as to form.
CONCLUSION
The attached resolutions and agreements are required to be submitted to the California Department of Tax and Fee Administration by April 12, 2024, in order to begin collection of Measure E Transactions and Use Tax.
ATTACHMENTS
1. Resolution authorizing the City Manager to execute agreements with the California Department of Tax and Fee Administration for implementation of a local transactions and use tax.
2. Resolution authorizing the examination of sales or transactions and use tax records.
3. Agreement for preparation to administer and operate city’s transactions and use tax ordinance.
4. Agreement for state administration of city transactions and use taxes.
REVIEWED BY
Erin Backs, Finance Director
Christian Bettenhausen, City Attorney
Christine Cordon, City Manager