Borough to conduct random sales tax audits of businesses

The borough will conduct sales tax audits periodically over the next year.

Ten businesses will be selected at a time, covering various categories of business types, Borough Manager Mason Villarma said April 24.

The audits are an effort to preserve equity for all businesses and consumers in the borough.

“There appears to be circumstances where businesses are collecting sales taxes but not remitting to the city, and maybe having a history of not ever remitting to the city,” Villarma said. “Those will be the first folks that we make sure get current with their obligation and we’ll assist them in doing that.”

Wrangell Municipal Code requires businesses to collect a 7% sales tax on most goods and services sold and delivered in town. The businesses are required to report their sales and pay the taxes to the borough quarterly. There are penalties and interest for non-payment or late payment.

The borough is budgeted to collect an estimated $3.5 million in sales tax receipts for the fiscal year that will end June 30. It’s the largest source of revenue to the municipality.

The goal of the audits is to bring all businesses into compliance, Villarma said, adding that he’s unaware of how long it’s been since the borough has conducted sales tax audits.

The reviews will likely be conducted by City Hall staff.