The state Taxation and Revenue Department has faced criticism in recent years from cities complaining they’re not getting their fair share of gross receipts tax revenue or the revenue they’ve been receiving has been erratic and error-filled.
Now, the state agency is facing a lawsuit from the city of Albuquerque and three other municipalities that argue they’re being shortchanged on their GRT distributions. A New Mexico Municipal League analysis estimates the four cities may be owed a combined $12 million.
And other cities are poised to join the litigation. Santa Fe city councilors have approved plans to do so and the city attorney says as many as 10 to 20 other local governments may follow.
GRT revenue accounts for about three-fourths of what cities spend on basic operations. A gross receipts tax is similar to a sales tax; consumers pay it to businesses, which pass it on to the state, which in turn returns part of it to cities and counties where the revenue was generated.
The state also handles refund requests by businesses that contend they overpaid their taxes, and this is where the lawsuit alleges the problem begins. In the suit, Albuquerque, Artesia, Farmington and Moriarty allege the state automatically grants refund claims filed by businesses, resulting in less revenue to cities. According to the suit, some refund requests are invalid – or they’re only partially justified – and the state doesn’t have a process in place to ensure cities get their money if the refund is denied.
A state Tax and Rev spokesman says his agency is committed to “responsible stewardship of taxpayer dollars and proper distribution of tax dollars.” But it’s difficult to reconcile that with erratic payments to municipalities – including a windfall payment of $5 million to $6 million the state sent Albuquerque in July because it miscalculated the city’s share of “hold harmless” money it was due.
It’s also difficult to feel sorry for municipal governments that go to the same well multiple times: Albuquerque, Artesia and Farmington have all raised their gross receipts tax rates to make up for revenue lost when the 2004 Legislature removed taxes on food and medicine – even though they also get “hold harmless” checks from the state to replace lost GRT.
Yet, the bottom line is the state Taxation and Revenue Department is entrusted with distributing GRT, and whether or not you agree with the tax and/or the tax rates, they are still required by law. Here’s betting Tax and Rev wouldn’t waive penalties and interest for someone who underpaid their taxes and had to be prodded to rectify the error nearly a year later.
Cities and counties deserve to receive all revenue they’re entitled to in a timely fashion – because they in turn use it to provide services to their residents. Municipalities shouldn’t have to take Tax and Rev to court to force it to do its job.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.