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Bethel's new finance director clashes with businesses and city officials to collect sales tax

Aerial view of Bethel, Alaska (Petra Harpak/KYUK)

Duane Wright is new to Bethel. A long-time CPA and fraud investigator, he was appointed the city’s new treasurer in April. At that time, he didn’t know that he was about to be caught in a whirlwind.

“I didn’t know, part of my job was sales tax compliance,” Wright said. “Before I got the job, I didn’t know anything about it.”

Soon after he started working, Bethel’s city council directed him to investigate whether the businesses were complying with the city’s sales tax laws, according to Wright. But what began as a simple city initiative is now splitting council members, ranking business owners and testing the resolve of Bethel’s first financial officer for the first time in years.

Under the Bethel Act, all business conducted in the city is taxable, with some exceptions. Bethel has no property tax, so a 6% sales tax is the backbone of the city’s revenue. Businesses must charge taxes to their customers and pass them on to the city. All of that money will help pay for roads, water, fire stations, police stations, and other infrastructure that runs Bethel.

No one has tried to enforce sales tax requirements for at least a decade, or longer, according to finance chief Wright. He estimates there are millions, potentially tens of millions, of dollars that businesses owe the city. That’s the money the city lacks to fund basic services and make improvements.

“When I dug deeper into the non-compliance aspects that I saw, it became clear that there was almost a non-compliance culture,” Wright said.

At the city council meeting on August 23, the treasurer estimated that only 20% of Bethel businesses pay sales tax to the city each month. Some businesses collect sales tax and do not pass it on to the city. Others have not submitted at all. Many businesses, especially those renting duplexes, do not have city business licenses. Some do not have state licenses. In summary, most of the business conducted within Bethel is not compliant with sales tax laws. For Light, it’s unacceptable.

“I liken the city to a living thing, and I think of her as a sort of mistress of the community,” Wright said. She said, “She doesn’t have her arms, she doesn’t have her legs. She doesn’t have the ability to act for herself. If she doesn’t collect sales tax, she’s a service that everyone takes for granted.” cannot be effectively provided.”

In the past few months, Wright has sent over 200 audit letters. He said that so far he has not collected money from any business owner.

The audit process can be traced back three years. If a business owner does not have a license to operate at Bethel or does not pay monthly sales tax, the city can demand payment for her three years.

The audit can also request personal financial records, including federal tax returns. Some business owners who didn’t want to speak publicly while being audited saw it as an invasion of privacy and were required to hand over all of their personal books and records just to get a business license in the city. I doubt there is.

If a business owner chooses to ignore the audit notice, city ordinances say they will be fined three times the sales tax they owe. At the last city council meeting, the city council considered an ordinance to grant amnesty to businesses that owe sales tax. The council defeated him 4 to 3.

For some in the community, the question is how financial directors pursue sales tax compliance as opposed to their actual goal of raising money for the city. Perry Barr, an audited city councilor for having a business license for consulting businesses, said at the last city council meeting that he would oppose the approach.

“I have a business license and now I am being audited without making a dime on this business license,” Barr said. “When we go out, we make a stern delivery of ‘we put a lien on your house, we put a lien on your boat, we put a lien on your snow machine.’ I think we can do better.”

A lien is a legal claim that a creditor can make against an asset, such as a house, to pay off a debt. Basically, if the city is in debt, the city may legally try to acquire the property.

Council member Mary “Beth” Hessler admitted that she had not been compliant. I said no. She lobbied her finance manager to come up with a payment plan. At a city council meeting, the finance director said Mayor Mark Springer also had a revoked consulting business license, but it had expired more than three years ago, so the finance department hadn’t investigated.

City grant manager John Sargent was audited for duplex rentals. In Sargent’s view, the financial director’s approach is punitive and excessive.

“He threw a book at me. Every violation, every interest penalty, failure to make records, failure to establish a business license.” did not give me any warning or letter.”

Sargent said he fully supports the city’s efforts to collect sales tax. As a city official, he knows how important it is. But he believes the finance director’s aggressive approach will ultimately backfire.

“Charge me sales tax. But how do you get it? This is crazy,” Sargent said. “It will make people angry and want to get around the code. They may comply at first, but they will look for ways to pay with cash.”

City Attorney Elizabeth “Libby” Bacalar said despite her frustration at the Treasurer’s actions, she said she was firmly operating within the city’s ordinance.

“This code gives financial officers a very high level of discretion, authority and enforcement, and I don’t think we’ve necessarily seen it implemented recently,” said Bakalar. “But code has power.”

Wright said he wasn’t trying to be harsh. He’s simply trying to raise money for the city.

“It’s disappointing that people can’t step back and say, ‘He’s not here as a devil incarnate, he’s here as a servant of the city,'” Wright said.

Wright said he has no plans to change the code to ease sales tax penalties. He also fully supports the city making plans to pay people as long as they do their duty. thinking about.

KYUK asked him if he thought he would be able to achieve that goal, given the blows he’d taken so far.

“You mean you’ve completely unpacked it? No,” said Wright. “There have been many moments where I feel that my career here may be short-lived. But that is not going to deter me from doing the right thing. I hope that you will feel

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