The Mississippi Economic Council, Mississippi Manufactures Association and a host of other state business groups have initiated a campaign they say is aimed at “reining in the state Department of Revenue.”
The campaign is an attempt to increase legislative support for a pair of House and Senate bills, both of which have passed their respective bodies, that force the DOR to present “clear and convincing” evidence whenever it chooses to apply a non-standard tax apportionment method to businesses, especially ones based out of state. The legislation would also require the taxpayer to present the same level of evidence if it seeks to be taxed in a non-statutorily approved manner.
The legislative measures seek to limit the effects of a Mississippi Supreme Court ruling last summer that upheld applying a market-based tax apportionment method to determine the tax bill of Equifax Credit Information Service of Atlanta. The market-based method calculated the company’s taxes based on revenue earned in Mississippi, thus increasing its tax liability from zero to over $700,000.
In a headline Monday on an MEC flier advertising a Wednesday morning legislative scrambler, the state chamber of commerce sought to rally members to support the legislation.
“MEC Members Raising Their Voices in Support of Reining in the MS Department of Revenue,” the headline read and urged members to “raise their voices” electronically at website mstaxfairness.com. The link leads to an MEC web address, where visitors are told:
“Mississippi is at a tipping point and we must return fairness to the tax administration process in order maintain our economic competitiveness. You can help us keep this momentum going by asking legislators to support the Mississippi Taxpayer Fairness Act, as outlined in Senate Bill 2487 and House Bill 799.
Fill out the form below and your response will be included in bound volumes — along with responses from hundreds of other business leaders from around the state — and presented to legislators.”
In addition to the MEC and Manufacturers Association, the web site lists these supporters:
» Council of State Taxation
» Mississippi Society of CPAs
» Mississippi Bar Taxation Section
» Mississippi Bankers Association
» National Federation of Independent Business
» Mississippi Poultry Association
» Mississippi Petroleum Marketers
» Mississippi Railroad Association
Kathy Waterbury, a longtime spokeswoman for the DOR who spends a good part of the legislative session at the Capitol, said the MEC campaign is news to her. “I have not heard about these tactics,” she said late Tuesday afternoon.
She said the MEC met with representatives of the MEC to discuss the bills but have not done so since reverse repealers were added to the measures. The repealers give each body another chance to kill the legislation before a final version is sent to Gov. Phil Bryant for his signature.
The MEC claims the DOR’s is greatly exaggerating in projecting a more than $300 million loss to the state treasury through the changes proposed in the bills. Senior vice president and COO Scott Waller put the cost at “a few million dollars” in an interview last week.
Waterbury said all of the cost projections have firm data and documentation to support them.
The calculations of $7 million in revenue losses after July 1 this year and $25 million next year are based on just the number of business taxpayers that have asked the DOR to apply the alternative tax method to their tax bills. Under the proposed changes, the taxpayer businesses would have to present clear and convincing evidence that an alternate apportionment method should apply.
Waller especially took exception to the DOR’s projection that requiring the use of certified mailings would cost the agency $100 million a year. However, Waterbury said the projection is based on the 180,000 tax statements the DOR averages sending out after taxpayer audits. Each certified mailing is $7.
The next problem, Waterbury said, is that taxpayers refuse to accept the certified mailings, thus forcing the DOR to send it agents or hired contractors out to find them to personally serve them.
“If we could put ‘Publisher’s Clearing House’ on our envelopes, that might change things,” she said.
DOR data shows that each of its agents collects an average $1,007 an hour in delinquent taxes. So diverting them to hunt down taxpayers who refuse certified mail will cause the state to lose $1,007 an hour in collected taxes.
Many of the searches for multistate taxpayers would force agents to go out of state or, possibly, out of the country. “And what happens when that taxpayer is not a person but a corporation?” Waterbury asked.
In that instance, you don’t know whom to serve, she said.