Rome and Floyd County officials can take some solace — and credit — for a new law protecting local governments and school systems from being blind-sided by surprise tax bills involving business overpayments of sales taxes.
The story began in July last year when our local governments and school systems got a shocking $4.5 million “bill” out of the blue from the state Department of Revenue for refunding excess sales taxes paid by an unidentified local business from 2005 to 2012. Included in the refund was 12 percent interest totaling $1.3 million. To pay the refund, the DOR took all local sales taxes for a full month except for a small portion due the Rome school system, which got $450,000 less than expected. The county, its two cities and the county school system got zero.
To make matters worse, the Revenue Department provided no information to local officials concerning how much more taxes would be taken. The City of Cave Spring was never officially notified of anything by the state agency. On top of all that, Floyd County commissioners had to raise the property tax by almost one mill to make up for the sales tax collections taken by the state.
Our local officials were guilty of nothing, as we pointed out at the time, but were forced to pay for someone else’s mistakes including the 12 percent interest rate on the refund to the unidentified local business — and the same punitive interest rate if local governments or school systems opted for an installment plan on the balance due the state.
In the wake of the debacle, The Rome News-Tribune called on the General Assembly to fix what went wrong. This has been done, to a large extent, with enactment of HB 960 introduced by state Rep. Trey Kelley, R-Cedartown, and co-sponsored by Rep. Katie Dempsey, R-Rome. The new law, officially Act 488, sets the interest rate on refunds at the prime loan rate plus 3 percent accruing monthly and provides some common sense procedures for informing local governments about major sales tax refunds.
The law creates a new category of “refund of local significance,” defined as a refund that is equal to 10 percent or more of the yearly average of sales taxes collected and distributed to any single political subdivision (county), based on the average of the latest three calendar years. Now the DOR must notify the local government within 30 business days of receiving a refund claim of local significance, including the date the claim was filed and the amount the local government would be responsible for if the claim were approved. When the final refund amount is determined, the DOR must also transmit that to the local government.
In turn, counties are allowed to inform their municipalities of the claim of local significance. Additionally, the new law provides for the Department of Audits and Accounts to review the DOR’s final determination of such claims to assess whether “proper procedures” and “appropriate methodology” were used in reaching the final determination on a claim. Any refund claim pending for two years will be automatically transferred to the Georgia Tax Tribunal to determine who was at fault. If it is the DOR, the agency must pay all interest due the taxpayer.
This is good law. The requirements of Act 488 would have prevented the shock and awe visited on Rome and Floyd County by the DOR’s unexpected and disruptive taking of $4.5 million in sales taxes. We commend Reps. Kelley and Dempsey, Ways and Means Committee Chairman Jay Powell, R-Camilla, and other members of the committee for their leadership in passing this legislation for the benefit not only of our community but the entire state of Georgia.