For the first time, the city of Kodiak will be able to sue businesses that do not remit sales taxes. 

The Kodiak City Council voted Thursday to allow the finance department to take legal action against registered businesses that do not remit sales tax. 

“It’s just reached a point where every other outlet has been exhausted,” said City Manager Mike Tvenge. “These people owe a substantial amount of tax and they haven’t been responding to the normal procedures for correspondence.”

Businesses are required to remit sales tax every quarter, though some remit on a monthly basis.  

Tvenge said the department works with businesses to catch up on sales tax remittance. “We’ve had people that couldn’t pay, we’ve had people on the utilities side that are delinquent. We work with them to make a payment plan,” Tvenge said. 

Some businesses that fail to remit sales tax often do so because of employee turnover or issues with their business, among other reasons, said City Finance Director Kelly Mayes, adding that they usually work with the city on a payment plan and become “good filers,” she said. 

However, the resolution addresses businesses that not only fail to remit, but also do not respond to phone calls, emails or letters from the city or collections agencies. 

“I think that by sending the message that we are trying to get everybody compliant, that will filter through and give us good solid customers that stay current,” Mayes said.  

While the city does impose fines and interest for late penalties, last week’s resolution is the first to allow the city to take legal action against delinquent businesses. 

“If you are collecting sales tax and you’re not giving it back to the city, that’s fraud and stealing,” Councillor John Whiddon said. 

The resolution allows the city to take action against 13 businesses that have not remitted sales taxes. 

Mayes said about 1593 returns, including sales tax, rental tax and bed tax, are submitted every quarter. 

The sales tax owed by the 13 businesses are not “nominal amounts,” Mayes said, adding that the Finance Department estimates the amount owed by looking at the quarterly remittances of similar businesses and taking their three-year average, or by any information available. 

Through passing the resolution, Mayes said she hopes that “people would not only become compliant and up to date, but they would stay compliant. If we start pursuing this avenue and taking this route, it would alleviate us from having to do sales tax audits in the future.” 

 “We want to level the playing field for our businesses to create a degree of fairness in our retail sector. But also, it’s just fraudulent and stealing if you are collecting sales tax and not remitting it,” Whiddon said.

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