Item 58 - Sales Tax & Use Tax and Transaction & Use Tax Revenue Record Examination, Auditing, Recovery and Consulting Services

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EXHIBIT A SCOPE OF WORK Sales & Use Tax and Transactions & Use Tax - Audit Services (SUTA) Services In performing the sales, transactions and use tax audit program MuniServices shall: 1. Identify and correct the sales & use tax and transactions and use tax reporting errors of businesses that, based on the nexus of their activities, are not properly registered with the City. 2. Identify and correct the reporting of businesses that are improperly reporting taxes to state and county pools (i.e. classifying sales tax and/or transactions tax as use tax) and thereby depriving the City of sales tax and/or transactions tax revenue. 3. Detect, document and correct sales & use tax and transactions & use tax reporting errors/omissions and thereby generate new, previously unrealized revenue for the City. 4. Ensure through comprehensive audit measures that the revenue information used for ongoing economic analysis includes all sales & use tax and transactions & use tax generators. 5. Assist the City with strategies to preserve and even enhance sales & use tax and transactions & use tax revenue generated by existing businesses within the City. MuniServices' proposed sales & use tax and transactions & use tax allocation audit services for the City includes five distinct types of audits: • Taxable Nexus Field audits • Permitization audits • Deficiency assessment audits • Accounts payable audits • Quarterly Distribution Report audits Taxable Nexus Field Audits MuniServices' initial and periodic taxable nexus field audits include a physical canvassing and evaluation of sales & use tax and transactions & use tax generating businesses located in the City. In the absence of this undertaking, significant misallocations will remain undetected. MuniServices' field audits focus on those businesses located in the City from which the City has not been receiving sales & use tax and transactions & use tax revenue. Permitization Audits Wholesalers, contractors, processors, manufacturers and other non -retail businesses will frequently not have a sales tax permit properly registered to the City in which they are located because their business operations do not include a point -of -sale qualifying activity. However, these companies will often generate local sales & use tax and transactions & use tax from the California Department of Tax and Fee Administration (CDTFA) audit deficiency assessments, occasional sales (i.e., mergers and acquisitions), and self -accrual of use tax on purchases. MuniServices' field audits facilitate the identification and correction of improperly registered permits for companies having point -of- sale operations in the City. Deficiency Assessment Audits When the California CDTFA audits taxpayers for sales & use tax and transactions & use tax compliance, it is not uncommon for the taxpayer to receive a substantial deficiency assessment due to underpayments and/or under - collections. In many cases, the local allocation portion of the deficiency assessment is distributed in error to the State pool, county pools, or other jurisdictions. Accordingly, MuniServices has developed proprietary criteria and techniques to detect and correct CDTFA deficiency assessment misallocations and thus expand the benefits produced by MuniServices' allocation audit service.