25F - AGMT - REVENUE AUDITING SRVS

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Accounts Payable Audits When California taxpayers purchase tangible personal property for which title passes out-of-state, the transactions are subject to use tax (rather than sales tax) which is collected by the vendor who in turn remits it to the BOE, with the local allocation typically distributed statewide or countywide through the pools. Under certain conditions, the seller may allocate the local tax by situs or the City may elect to self -accrue the use tax and remit it directly to the BOE, in which case the local portion will come back to the City in the same manner as sales tax. MuniServices' accounts payable audit will include a review of the City's purchases to identify opportunities for the City to capture the 1% local allocation on purchases subject to use tax and the local district tax where applicable. In this regard, MuniServices will prepare the documentation to facilitate the election, including assistance in preparing and filing the tax returns. Quarterly Distribution Report Audits Every three months, the City and MuniServices receive a Quarterly Distribution Report (QDR) from the BOE with the local allocation amount reflected by permit number. MuniServices' QDR audits detect and correct taxpayer -reporting errors and thereby generate new, previously unrealized sales/transactions/use tax revenue for the City. MuniServices' QDR audits focus on those accounts where MuniServices observes a substantial decline in the sales/transactions/use tax revenue allocation for a particular business entity in a given quarter. In most cases, accounts showing zero balances have either relocated or simply reported late, in which case the payments will not be reflected until the next quarter's QDR. Therefore, six months must lapse before the ADRs indicate whether a zero balance account can be attributed to a late payment or a misallocation. Cities and counties may only recover misallocated Bradley -Burns sales tax revenue for three quarters prior to the BOE being notified of the reporting error and misallocated District tax revenues for between three quarters and three years. Therefore QDR audits must be conducted in a timely manner in order to preserve the opportunity for the City to recover misallocated revenue. MuniServices shall conduct the QDR audit each and every quarter to minimize the potential of lost revenue to the City. Confidentiality Provisions MuniServices is authorized by this Agreement to examine transaction tax, sales tax, and use tax records of the BOE provided to City pursuant to contract under the Bradley -Burns Uniform Sales and Use Tax Law and California Revenue & Taxation Code applicable to transactions and use taxes. If the City adopts a new transaction tax or taxes after the effective date of this Agreement the Parties intend for the work under this agreement to include that tax or taxes. MuniServices is required to disclose information contained in, or derived from, those sales, transaction, and use tax records only to an officer or employee of the City who is authorized by resolution to examine the information. MuniServices is prohibited from performing consulting services for a retailer during the Term of this Agreement. MuniServices is prohibited from retaining the information contained in, or derived from, those sales, transaction, and use tax records, after this Agreement has expired. This Agreement, and MuniServices' and City's obligations with respect to confidentiality of taxpayer data pursuant to the Bradley Bums Revenue and Taxation Code, shall continue until final payment for all services rendered hereunder. 25F-10