HomeMy WebLinkAboutAGENDA REPORT 2014 0507 CCSA REG ITEM 10DITEM 10.13.
DATE: April 9, 2014 (City Council Meeting of May 7, 2014)
SUBJECT: Consider Agreement for Sales, Use and Transaction Tax Audit and
Information Services to Hinderliter, De Llamas and Associates and
Consider Resolution Authorizing Examination of Sales Use and
Transaction Tax Records
Since 1993 the City has utilized the services of Hinderliter, De Llamas and Associates
(HdL) to perform sales tax audits and sales tax information services. The City currently
receives quarterly sales tax analysis from HdL and sales tax audit services. The current
contract price is $300 per month for information services. The cost for audit services is
15% of what HdL recovers for all prior quarters and for the following eight quarters in
the future.
Staff is requesting the City Council consider updating the agreement with HdL, and
authorize the City Manager to sign the agreement and to sign "Sales Tax Audit, Work
Authorizations" to enable HdL to perform sales tax auditing services.
DISCUSSION
The current agreement is twenty years old. The proposed agreement has updated
indemnity language and an increase in the price. The information services price
increases to $350 per month (currently $300 per month) with an annual increase linked
to the Consumer Price Index, subject to a maximum of 5% per year. The price for audit
services remains the same 15% calculation.
HdL services have assisted the City with economic development and financial forecast
of the sales tax revenues. The audit services have ensured that the City receives the
taxes that are generated by the businesses which reside within the City.
The attached resolution authorizes the State Board of Equalization to release the City of
Moorpark's sales tax data to HdL.
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Honorable City Council
May 7, 2014
Page 2
The proposed agreement has no expiration date; however, it has a 30 -day termination
clause by either party.
FISCAL IMPACT
The annual increase in cost is $600 and each year thereafter the increase is linked to
the Consumer Price Index, subject to a maximum of 5%. The increased cost for the
balance of fiscal year 2013-14 can be absorbed by currently approved appropriation.
STAFF RECOMMENDATION
1. Award the agreement to Hinderliter, De Llamas and Associates; and authorize
the City Manager to execute the agreement, subject to the final language
approval by the City Manager and City Attorney. Additionally, authorize the City
Manager to sign "Sales Tax Audit, Work Authorizations" to enable HdL to perform
audit services by contacting certain businesses and the State Board of
Equalization.
2. Adopt Resolution No. 2014 -
Attachments:
1. Agreement for Sales, Use and Transactions Tax Audit and Information
Services between the City of Moorpark and Hinderliter, De Llamas and
Associates.
2. Resolution No. 2014-
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ATTACHMENT 1
AGREEMENT BETWEEN CITY OF MOORPARK AND HINDERLITER, DE LLAMAS
AND ASSOCIATES, FOR SALES, USE AND TRANSACTIONS TAX AUDIT
AND INFORMATION SERVICES
This Agreement is made and entered into as of the day of
2013 (the "Effective Date") by and between the CITY OF MOORPARK, a municipal
corporation hereinafter called CITY, and HINDERLITER, DE LLAMAS AND
ASSOCIATES a California Corporation, hereinafter called CONTRACTOR.
I. RECITALS
WHEREAS, sales, use and transactions tax revenues can be increased through:
a system of continuous monitoring, identification and correction of allocation
errors, and
WHEREAS, an effective program of sales and use tax management will improve
identification of economic opportunities; provide for more accurate sales and use
tax forecasting; and assist in related revenue collections; and
WHEREAS, CITY desires the combination of data entry, report preparation and
analysis necessary to effectively manage its sales and use tax base; recover
revenues erroneously allocated to other jurisdictions and allocation pools; and
maximize its financial and economic planning; and
WHEREAS, CONTRACTOR has the programs, equipment and personnel
required to deliver the sales and use tax related services referenced herein;
THEREFORE, CITY and CONTRACTOR, for the consideration hereinafter
described, mutually agree as follows:
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II. SERVICES
The CONTRACTOR shall perform the following services:
A. SALES TAX AND ECONOMIC ANALYSIS
1. CONTRACTOR shall establish a special database that identifies the
name, address and quarterly allocations of all sales tax producers within
the CITY for the most current and all quarters back to fiscal year 1992-
1993 or earlier, if the CITY has prior historical sales tax data available on
computer readable magnetic media. This database will be utilized to
generate special reports to the CITY on: major sales tax producers by
rank and category, sales tax activity by categories, or business districts,
identification of reporting aberrations, and per capita and outlet
comparisons with regional and statewide sales.
2. CONTRACTOR shall provide up -dated reports each quarter identifying
changes in sales by individual businesses, business groups and
categories and by geographic area. Quarterly aberrations due to State
audits, fund transfers, and receivables along with late or double
payments will be identified. Quarterly reconciliation worksheets to assist
finance officer with budget forecasting will also be included.
3. CONTRACTOR shall additionally provide a quarterly summary analysis
for the CITY to share with Chambers of Commerce and other economic
development interest groups that analyze CITY'S sales tax trends by
major groups, and geographic areas without disclosing confidential
information.
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4. CONTRACTOR shall make available to CITY Staff the HdL web -based
sales tax computer software program containing sellers permit and
quarterly allocation information for all in -city business outlets registered
with the State Board of Equalization and update quarterly. Software
shall allow city staff to search business by street address, account
number, business name, business type and keyword; arrange data by
geographic area and print out a variety of reports.
B. ALLOCATION AUDIT AND RECOVERY
1. CONTRACTOR shall conduct initial and on-going sales and use tax
audits to identify and correct distribution errors, thereby generating
previously unrealized sales tax income for the CITY and/or recovering
misallocated sales tax from previously properly registered taxpayers.
Common errors that will be monitored and corrected include, but are not
limited to: transposition errors resulting in misallocations; erroneous
consolidation of multiple outlets; misreporting of "point of sale" to the
wrong location; delays in reporting new outlets; misallocating use tax
payments to the allocation pools or wrong jurisdiction and erroneous
fund transfers and adjustments.
2. CONTRACTOR will initiate contacts with the appropriate sales
management and accounting officials in companies that have
businesses where a probability of error exists to verify whether current
tax receipts accurately reflect the local sales activity. Such contacts will
be conducted in a professional and courteous manner so as to enhance
CITY'S relations with the business community.
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3. CONTRACTOR shall prepare and submit to the State Board of
Equalization all information necessary to correct any allocation errors
that are identified and shall follow-up with the individual businesses and
the State Board of Equalization to ensure that all back quarter payments
due the CITY are recovered.
4. If during the course of its audit, CONTRACTOR finds businesses located
in the CITY that are properly reporting sales tax but have the potential
for modifying their operation to provide an even greater share to the
CITY, CONTRACTOR shall so advise CITY and upon request, shall
work with those businesses and the CITY to encourage such changes.
C. ONGOING CONSULTATION
Throughout the term of this Agreement, CONTRACTOR shall advise and
work with CITY Staff on technical questions related to sales, use and
transactions tax; advise CITY Business License staff on utilization of reports
to enhance business license collection efforts; provide sales tax projections
for proposed annexations, economic development projects and budget
planning; and generally serve as support staff on sales, use and transactions
tax related issues.
III. OPTIONAL SERVICES
Optional services beyond the scope of this Agreement are available at
CONTRACTOR'S hourly rates as in effect from time to time. Optional services
include, but are not limited to, negotiating/review of tax sharing agreements,
establishing purchasing corporations and meeting with taxpayers to encourage
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IV
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self-assessment of use tax. The hourly rates in effect at the time of the
execution of this Agreement are as follows:
Principal
Programmer
Senior Analyst
Analyst
$225 per hour
$195 per hour
$150 per hour
$ 75 per hour
CONTRACTOR may change such hourly rates from time to time upon not less
than 30 days' prior written notice to CITY.
CONFIDENTIALITY
Section 7056 of the State of California Revenue and Taxation Code specifically
limits the disclosure of confidential taxpayer information contained in the records
of the State Board of Equalization. This section specifies the conditions under
which a CITY may authorize persons other than CITY officers and employees to
examine State Sales and Use Tax records.
The following conditions specified in Section 7056 (b), (1) of the State of
California Revenue and Taxation Code are hereby made part of this Agreement:
A. CONTRACTOR is authorized by this Agreement to examine sales, use or
transactions and use tax records of the State Board of Equalization provided
to CITY pursuant to contract under the Bradley -Burns Uniform Sales and
Use Tax Law.
B. CONTRACTOR is required to disclose information contained in, or derived
from, those sales, use or transactions and use tax records only to an officer
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or employee of the CITY who is authorized by resolution to examine the
information.
C. CONTRACTOR is prohibited from performing consulting services for a
retailer, as defined in Section 6015 of the State of California Revenue and
Taxation Code, during the term of this Agreement.
D. CONTRACTOR is prohibited from retaining the information contained in, or
derived from those sales or transactions and use tax records, after this
Agreement has expired. Information obtained by examination of State Board
of Equalization records shall be used only for purposes related to collection
of local sales and use tax or for other governmental functions of the CITY as
set forth by resolution adopted pursuant to Section 7056 (b) of the State of
California Revenue and Taxation Code. The resolution shall designate the
CONTRACTOR as a person authorized to examine sales and use tax
records and certify that this Agreement meets the requirements set forth
above and in Section 7056 (b), (1) of the State of California Revenue and
Taxation Code.
V. OWNERSHIP OF MATERIALS, CONFIDENTIALITY
A. Software Use. CONTRACTOR hereby provides authorization to the CITY to
access CONTRACTOR'S Sales Tax website if the CITY chooses to
subscribe to the software and reports option. The website shall only be used
by authorized CITY staff. No access will be granted to any 3rd party without
explicit written authorization by CONTRACTOR. The CITY shall not sublet,
duplicate, modify, decompile, reverse engineer, disassemble, or attempt to
derive the source code of said software. The software use granted
hereunder shall not imply ownership by CITY of said software, or any right of
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the CITY to sell said software or the use of same, or any right to use said
software for the benefit of others. This software use authorization is not
transferable. Upon termination of this agreement the software use
authorization shall expire, and all CITY staff website logins shall be de-
activated.
B. Proprietary Information. As used herein, the term "proprietary information"
means any information which relates to CONTRACTOR'S computer or data
processing programs; data processing applications, routines, subroutines,
techniques or systems; desktop or web -based software; or business
processes. CITY shall hold in confidence and shall not disclose to any other
party any CONTRACTOR proprietary information in connection with this
Agreement, or otherwise learned or obtained by the CITY in connection with
this Agreement. The obligations imposed by this Paragraph shall survive
any expiration or termination of this Agreement. The terms of this section
shall not apply to any information that is public information.
VI. CONSIDERATION
A. CONTRACTOR shall establish the sales and transactions tax databases,
shall provide the ongoing reports and analysis and shall make available the
computer software program and databases referenced above for a fee of
$350.00 per month, commencing with the month of the Effective Date
(hereafter referred to as "monthly fee"). The monthly fee shall be invoiced
quarterly in arrears, and shall be payable no later than 30 days after invoice
date. The monthly fee shall increase annually following the month of the
Effective Date by the percentage increase in the "CPI" for the preceding
twelve month period, not to exceed 5% annually. In no event shall the
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monthly fee be reduced by this calculation. For purposes of this Agreement,
the "CPI" shall mean the Consumer Price Index - All Urban Consumers for
the surrounding statistical metropolitan area nearest CITY, All Items (1982-
84 = 100), as published by the U.S. Department of Labor, Bureau of Labor
Statistics, or, if such index should ceased to be published, any reasonably
comparable index selected by CONTRACTOR.
B. CONTRACTOR shall be further paid 15% of all new and recovered sales,
transactions and/or use tax revenue received by the CITY as a result, in
whole or in part, of audit and recovery work performed by CONTRACTOR
(hereafter referred to as "audit fees"), including any reimbursement from the
Sales and Use Tax Compensation Fund as outlined in Section 97.68 of the
State of California Revenue and Taxation Code. In the event that
CONTRACTOR is responsible, in whole or in part, for an increase in the tax
reported by businesses already properly making tax payments to the CITY, it
shall be CONTRACTOR'S responsibility to separate and support the
incremental amount that is attributable, in whole or in part, to its efforts prior
to the application of the audit fee. Said audit fees will apply to state fund
transfers received for back quarter reallocations and monies received in the
first eight consecutive reporting quarters following completion of the audit by
CONTRACTOR and confirmation of corrections by the State Board of
Equalization. CONTRACTOR shall provide CITY with an itemized quarterly
invoice showing all formula calculations and amounts due for audit fees,
which shall be payable no later than 30 days following invoice date.
CONTRACTOR shall obtain CITY approval prior to beginning the work of
correcting tax reporting methodology or "point of sale" for specific businesses
where said payment of the percentage fee will be expected. Said approval
shall be deemed given when the City Manager, or his designated
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representative, signs a Sales Tax Audit Authorization form, a copy of which
is attached as "Exhibit A." CITY shall pay audit fees upon CONTRACTOR'S
submittal of evidence of State Fund Transfers and payments to CITY from
businesses identified in the audit and approved by the CITY. The audit fees
shall be payable on all new and/or recovered tax revenues received from
approved businesses as a consequence, in whole or in part, of the audit, and
even if CITY, of its own volition, assists with the audit, works in parallel with
the audit, and/or expends attorneys fees or other out-of-pocket costs in
connection with any of the foregoing.
The above sums shall constitute full reimbursement to CONTRACTOR for all
direct and indirect expenses incurred by CONTRACTOR in performing audits
including the salaries of CONTRACTOR'S employees, and travel expenses
connected with contacting local and out-of-state businesses and State Board
of Equalization representatives. All travel expenses shall be accompanied
by documentation supporting travel and documentation shall be subject to
approval of the City Manager.
C. CONTRACTOR shall invoice CITY for any optional services rendered to
CITY in accordance with section III above on a monthly or a quarterly basis,
at CONTRACTOR'S option. Any such invoices shall be payable by CITY no
later than 30 days following invoice date.
D. Any invoices not paid on a due and timely basis shall accrue monthly interest
at a rate equivalent to ten percent (10%) per annum until paid.
VII. CITY MATERIALS AND SUPPORT
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CITY shall adopt a resolution in a form acceptable to the State Board of
Equalization and in compliance with Section 7056 of the State of California
Revenue and Taxation Code, authorizing CONTRACTOR to examine the
confidential sales tax records of CITY. CITY further agrees to provide any
information or assistance that may readily be available such as business license
records within the CITY and to provide CONTRACTOR with proper identification
for contacting businesses. CITY further agrees to continue CONTRACTOR'S
authorization to examine the confidential sales tax records of the CITY by
maintaining CONTRACTOR'S name on the CITY resolution or by providing
copies of future allocation reports on computer readable magnetic media until
such time as all audit adjustments have been completed by the State Board of
Equalization and audit fees due the CONTRACTOR have been paid.
VIII. LICENSE, PERMITS, FEES AND ASSESSMENTS
CONTRACTOR shall obtain such licenses, permits and approvals (collectively
the "Permits") as may be required by law for the performance of the services
required by this Agreement. CITY shall assist CONTRACTOR in obtaining such
Permits, and CITY shall absorb all fees, assessments and taxes which are
necessary for any Permits required to be issued by CITY.
IX. TERMINATION
This Agreement may be terminated for convenience by either party by giving 30
days written notice to the other of such termination and specifying the effective
date thereof. Upon the presentation of such notice, CONTRACTOR may
continue to work through the date of termination. Upon termination as provided
herein, CONTRACTOR shall be paid the value of all tax analysis and reporting
work performed less payments previously made by CITY. In ascertaining the
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value of the work performed up to the date of termination, consideration shall be
given to amounts due for any unpaid invoices, and to businesses identified by
CONTRACTOR which make tax payments after termination of this Agreement as
a result of CONTRACTOR'S work. After CITY receives said tax payments for
such businesses, CONTRACTOR shall be paid the audit fees resulting from tax
payments made by the business for back quarter reallocations and the first eight
consecutive reporting quarters following completion of the audit by
CONTRACTOR and confirmation of corrections by the State Board of
Equalization. Compensation for any audit work previously authorized and
satisfactorily performed shall be made at the times provided in the preceding
section entitled "Consideration."
All documents, data, surveys and reports prepared by CONTRACTOR pursuant
to this Agreement shall be considered the property of the CITY and upon
payment for services performed by CONTRACTOR, such documents and other
identified materials shall be delivered to CITY by CONTRACTOR.
X. INDEPENDENT CONTRACTOR
CONTRACTOR shall perform the services hereunder as an independent
contractor and shall furnish such services in its own manner and method, and
under no circumstances or conditions shall any agent, servant, or employee of
CONTRACTOR be considered as an employee of CITY.
XI. NON -ASSIGNMENT
This Agreement is not assignable either in whole or in part by CONTRACTOR
without the written consent of CITY.
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XII. ATTORNEY'S FEES
In the event a legal action is commenced to enforce any of the provisions of this
Agreement, the prevailing party shall be entitled to recover its costs and
reasonable attorney's fees.
XIII. GOVERNING LAW
The laws of the State of California shall govern the rights, obligations, duties and
liabilities of the parties to this Agreement and shall also govern the interpretation
of this Agreement.
XIV. INSURANCE
CONTRACTOR shall maintain the policies set out below, and in amounts of
coverage not less than those indicated herein. Additionally, where required by
CITY, CONTRACTOR shall name the CITY as an additional insured on
CONTRACTOR'S comprehensive general liability policy and provide a Certificate
of Insurance.
1. Worker's Compensation and Employer's Liability. In accordance with
applicable law.
2. Comprehensive General Liability_ Bodily injury liability in the amount of
$1,000,000 for each person in any one accident, and $1,000,000 for injuries
sustained by two or more persons in any one accident. Property damage
liability in the amount of $1,000,000 for each accident, and $2,000,000
aggregate for each year of the policy period. CONTRACTOR agrees to have
its insurer endorse the third party general liability coverage required within to
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include as additional insured the CITY, its officials, employees, and agents,
using a standard ISO endorsement, subject to acceptance by the City
Manager.
3. Comprehensive Automobile Liability. Bodily injury liability coverage of
$1,000,000 for each accident.
4. Errors and Omissions. In addition to any other insurance required by this
Agreement, CONTRACTOR shall provide and maintain, during the term of
this Agreement, professional liability insurance in the amount of $1,000,000
as evidenced by a Certificate of Insurance.
XV. INDEMNIFICATION
CONTRACTOR shall be responsible for all damages to persons or property that
occur as a result of CONTRACTOR'S or its officers, agents, employees, and/or
servants fault or negligence in connection with CONTRACTOR'S participation in
the activity or service. Further, CONTRACTOR shall indemnify and save
harmless the CITY, its officers, agents, employees, and servants from all claims,
suits, or actions of every name, kind, description, brought for, or on account of,
injuries to or death of any person or damage to property resulting from the fault
or negligence of CONTRACTOR, its officers, agents, employees, and/or
servants in connection with the activity or service.
CITY shall indemnify and save harmless CONTRACTOR, its officers, agents,
employees, and servants from all claims, suits, or actions of every name, kind,
description, brought for, or on account of, injuries to or death of any person or
damage to property resulting from the fault or negligence of the CITY, its officers,
agents, employees, and/or servants in connection with the activity or services.
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XVI. NOTICE
All notices required by this Agreement shall be given to CITY and
CONTRACTOR in writing, by personal delivery or first class mail postage
prepaid, addressed as follows:
CITY: CITY OF MOORPARK
City Manager
799 Moorpark Avenue
Moorpark, CA 93021
CONTRACTOR: HINDERLITER, DE LLAMAS, & ASSOCIATES
1340 Valley Vista Drive, Suite 200
Diamond Bar, CA 91765
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first above written by their respective officers duly authorized in
that behalf.
CITY:
CITY OF MOORPARK
Steven, Kueny, City Manager
Maureen Benson, City Clerk
CONTRACTOR:
HINDERLITER, DE LLAMAS& ASSOCIATES
A California Corporation
[Name] [Title]
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SAMPLE
EXHIBIT A
Sales Tax Audit
Work Authorization No.
SAMPLE
The following business or businesses, located in the City of Moorpark, have been
identified as having the potential for recovering or generating additional sales tax
revenue to the City of Moorpark. Contractor is hereby solely authorized to contact the
given business(s) and the State Board of Equalization to verify the accuracy of the
current reporting methodology and obtain the necessary documentation for the State
Board of Equalization, to modify allocation formulas, and to return previous
misallocated revenue that may be due to City.
Contractor's compensation shall be 15% of the sales and/or use tax revenue received
by the City as a result of audit and recovery work performed by Contractor, as set forth
in the Agreement between Contractor and City.
CITY OF MOORPARK
Date:
HINDERLITER, DE LLAMAS AND ASSOCIATES
in
Date:
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812621.2
ATTACHMENT 2
RESOLUTION NO. 2014 -
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
MOORPARK, CALIFORNIA, AUTHORIZING EXAMINATION
OF SALES, USE AND TRANSACTIONS TAX RECORDS
WHEREAS, pursuant to Ordinance, the City of Moorpark entered into a contract
with the State Board of Equalization to perform all functions incident to the
administration and collection of local sales, use and transactions taxes; and
WHEREAS, the City Council of the City of Moorpark deems it desirable and
necessary for authorized representatives of the City to examine confidential sales, use
and transactions tax records of the State Board of Equalization pertaining to sales, use,
and transactions taxes collected by the Board for the City pursuant to that contract; and
WHEREAS, Section 7056 of the California Revenue and Taxation Code sets
forth certain requirements and conditions for the disclosure of Board of Equalization
records, and established criminal penalties for the unlawful disclosure of information
contained in, or derived from, the sales, use and transactions tax records of the Board.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MOORPARK
DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. That the City Manager, or other officer or employee of the City
designated in writing by the City Manager to the State Board of Equalization (hereafter
referred to as Board), is hereby appointed to represent the City of Moorpark with
authority to examine sales, use and transactions tax records of the Board pertaining to
sales, use and transactions taxes collected for the City by the Board pursuant to the
contract between the City and Board. The information obtained by examination of
Board records shall be used only for purposes related to the collection of City sales, use
and transactions taxes by the Board pursuant to that contract.
SECTION 2. That the City Manager, or other officer or employee of the City
designated in writing by the City manager to the Board, is hereby appointed to represent
the City with authority to examine those sales, use and transactions tax records of the
Board, for purposes related to the following governmental functions of the City:
a) City administration
b) Revenue management and budgeting
c) Community and economic development
d) Business license tax administration
The information obtained by examination of Board records shall be used only for those
governmental functions of the City listed above.
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Resolution 2014 -
SECTION 3. That Hinderliter, de Llamas & Associates is hereby designated to
examine the sales, use and transactions tax records of the Board pertaining to sales,
use and transactions taxes collected for the City by the Board. The person or entity
designated by this section meets all of the following conditions:
a) has an existing contract with the City to examine those sales, use and
transactions tax records;
b) is required by that contract to disclose information contained in, or derived from,
those sales, use and transactions tax records only to the officer or employee
authorized under Sections 1 or 2 of this resolution to examine the information.
c) is prohibited by that contract from performing consulting services for a retailer
during the terms of that contract; and
d) is prohibited by that contract from retaining the information contained in, or
derived from those sales, use and transactions tax records, after that contract
has expired.
The information obtained by examination of Board records shall be used only for
purposes related to the collection of City sales, use and transactions taxes by the Board
pursuant to the contract between the City and the Board and for purposed relating to the
governmental functions of the city listed in section 2 of this resolution.
SECTION 4. The City Clerk shall certify to the adoption of this resolution and
shall cause a certified resolution to be filed in the book of original resolutions.
PASSED AND ADOPTED this th day of , 2014.
Janice S. Parvin, Mayor
ATTEST:
Maureen Benson, City Clerk
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