State steps up enforcement of privilege tax

Posted by Samuel King - bio | email

MONTGOMERY, AL (WSFA) -  With the help of a new computer program, the state is going after some folks who may legitimately not know they still owe their state privilege tax, and the city is doing the same with its business licenses fees.

Tax-funded improvements are happening outside Affordable Eyewear in Montgomery.  Its owner, Hobson Cox, doesn't mind paying the city's license taxes, but says the government should be doing more to help small businesses.

"We are doing nothing to really enhance or make small business viable again, I mean there's nothing to protect us," Cox said

But those collecting the taxes say they enforce the laws, not make them.  One law the state revenue department has to enforce is the privilege tax.

Despite collecting more than $107 million dollars from the tax last year the Department of Revenue says more than half the people who were supposed to pay the tax did not.

"It's one that's highly misunderstood, and the compliance with it, the noncompliance is really high" said Richard Henninger, Director of the Individual & Corporate Tax Division of the Alabama Department of Revenue.

The annual tax ranges from a minimum $100 to $15,0000 each year, depending on a business or corporation's net worth.   A new computer system has allowed the state to discover that more than 250,000 registered business entities in the state have not filed payment for the tax.  In some cases, it may be due even if the business is out of business.

"If you've got a business and you're dissolving or whatever, you need to officially dissolve, you need to close that business," said Ann Winborne, Revenue Manager with the Individual & Corporate Tax Division of the Alabama Department of Revenue.

City of Montgomery officials told WSFA 12 News the city is hiring two more inspectors to make sure businesses are paying its license fees, something that's taking on added importance because sales tax revenue in the city is down.

"We estimate that revenue to fund our ensuing budget, if we don't get we have to cut customer services and we don't want to do that," said Lloyd Faulkner, Finance Director of the City of Montgomery.

To formally dissolve a business, you must file paperwork with the Secretary of State's Office.

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