Require an Annual August Remittance of One-Half of August s Sales Tax Collections by Monthly Taxpayers


The Legislature should require sales taxpayers to remit half of August s collections during that month.


Background
Currently, sales tax payments are remitted either monthly, quarterly or annually. They also may be prepaid either on a quarterly or a monthly basis.

Monthly taxpayers, including those who collect taxes on their own purchase or use of taxable items, are required by law to remit to the state all tax collections less any applicable discounts by the 20th day of the month following the end of each calendar month.


Recommendation
The Legislature should require all monthly taxpayers to remit one-half of each August s sales tax collections during that month. Specifically, sales taxes collected between August 1 and August 15 would be due with their regular August 20th payment. Monthly taxpayers would remit tax in the usual manner during all other months.

This is not a prepayment plan, but a speeding up of the remittance of actual taxes collected and owed to the state. This would impose an additional burden and would reduce taxpayer cash flow, but should be considered as preferable to a tax increase.


Implications
An annual payment by monthly filers of taxes actually collected during the first 15 days of August would increase August s collections and decrease September s collections. Although the initial imposition of this proposal might temporarily inconvenience some taxpayers, the prompt payment to the state of some of its sales tax revenues collected, but not yet remitted will enhance the revenue stream at a critical time each fiscal year. During the first year of implementation, all months would have normal collection patterns except August, which would be larger than usual, thereby producing a fiscal gain.

Each following year would see smaller than normal (current) collections in September and larger collections in August. These differences would essentially offset each other. It is important to stress that failure to speed up collections each year after imp lementation would cause a fiscal loss.

Fiscal Gain to the General Gain to the Change in
Year Revenue Fund 001 Highway Fund 006 FTEs

1994 $215,113,000 $487,000 0
1995 0 0 0
1996 0 0 0
1997 0 0 0
1998 0 0 0