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Item # 58
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
June 21, 2022
TOPIC: Sales Tax & Use Tax and Transaction & Use Tax Revenue Record Examination,
Auditing, Recovery and Consulting Services
AGENDA TITLE:
Adopt a Resolution Authorizing Examination of California Department of Tax and Fee
Administration Sales and Transactions and Use Tax Records by City Employees and by
the City's Contracted Tax Reporting, Analysis and Recovery Services Consultant and
Approve Third Amendment to Agreement with MuniServices, LLC
RECOMMENDED ACTION
1. Adopt a resolution authorizing examination of California Department of Tax and
Fee Administration sales and transactions and use tax records by City employees
(designed by position title), and by the City's contracted tax reporting, analysis and
recovery services consultant, effective July 1, 2022.
2. Authorize the City Manager to execute an amendment to the agreement with
MuniServices, LLC beginning July 1, 2022 through June 30, 2024 for an annual
amount not to exceed $10,000 - covering the web -based reporting systems Sales
Tax Analysis Reporting System (STARS) and Geographic Revenue Information
Application System (GRIA); plus an annual Cost Price Index ("CPI") adjustment
not less than two percent (2%) or greater than four percent (4%); plus a 13% of
recovered sales tax of revenues over the life of the agreement, with a contingency
of up to $60,000 to cover other consulting services subject to non -substantive
changes approved by the City Manager and the City Attorney.
DISCUSSION
As of the most recent Third Quarter Budget Update for FY 2021-22 presented on May 3,
2022 to the City Council, the Sales and Use Tax (Bradley Burns) represents
approximately 16.33% of the City's total General Fund revenue, while Transaction and
Use Tax (Measure X) represents approximately 22.46% of the City's total General Fund
revenue. Sales Tax is levied upon retailers who sell tangible property in the State of
California. The Sales Tax is measured by gross receipts from retail sales. A Use Tax
complements the Sales Tax and is imposed on the storage, use, or other consumption of
tangible personal property purchased from any out-of-state retailer. The Use Tax is
measured by the sales price of the property and the rate is the same for both the Sales
Resolution Authorizing Examination & Third Amendment to Agreement with
MuniServices, LLC
June 21, 2022
Page 2
Tax and the Use Tax. For the City of Santa Ana, the effective sales tax rate is 9.25% with
6% going to the state, 2.5% going to the City and the remainder going to the County for
local transportation.
Currently MuniServices, LLC ("MuniServices"), provides the City Sales and Use Tax
revenue record examination, auditing, recovery and consulting services. As part of these
services, MuniServices provides both a web -based software application (STARS) to aid
in tracking and analyzing sales and use taxes as well as a web -based geographic revenue
information application (GRIA) to aggregate for analysis of a variety of general fund
revenues along with reported sales and use tax data, geographically. However, the
current agreement with MuniServices (A-2019-017) will lapse at the end of this fiscal year.
To accommodate a thorough and deliberate Request for Proposals (RFP) process and
because Sales and Use Tax and Transaction and Use Tax represent a large portion of
the City's total General Fund revenue, staff recommends the approval of a Third
Amendment to Agreement with MuniServices to receive continuous CDTFA revenue
record examination, auditing, recovery and consulting services. MuniServices, LLC
works directly with city and county management, finance directors, recorders, judges, and
clerks, and has uncovered over $2.4 billion in new revenue, processed over $12.4 billion,
and successfully streamlined operations for more than 2,000 jurisdictions. In FY 2020-
21, MuniServices recovered $1,500,000 in sales tax revenue for the City and to -date, in
FY 2021-22, MuniServices has recovered $1,100,000. Although Avenu Insights &
Analytics, LLC is the official branding name of the company, it still operates under
MuniServices, LLC for sales tax services for many agencies. With the Third Amendment
to Agreement, the Assuming Party (MuniServices, LLC) becomes entitled to all rights,
title, and interest of the Assigning Party (Avenu Insights & Analytics, LLC).
Furthermore, the State of California Revenue and Taxation Code Section 7056 authorizes
the examination of confidential Sales and Use Tax and Transaction and Use Tax data to
officers or employees of local jurisdictions who are designated by resolution of the
legislative body of the jurisdiction. The review of confidential information is governed by
state law and sets certain requirements and conditions for the disclosure of Sales and
Use Tax and Transaction and Use Tax information. Santa Ana Resolution No. 2019-004
designates the Executive Director of Finance and Management Services, Assistant
Director of Finance, Treasury and Customer Services Manager, Budget Supervisor, and
the Revenue Supervisor as the City representatives to review sales tax information.
However, since 2019, titles for these positions have changed and additional staff
involvement is required. As a result, Santa Ana Resolution No. 2019-004 requires a
revision and accompanying City Council approval. The resolution authorizing
examination of CDTFA sales and transactions and use tax records by City employees
(designed by position title), and by the City's contracted tax reporting, analysis and
recovery services consultant will be forwarded to the CDTFA to be placed on record.
Resolution Authorizing Examination & Third Amendment to Agreement with
MuniServices, LLC
June 21, 2022
Page 3
Therefore, staff recommends the adoption of a resolution authorizing examination of
CDTFA sales and transactions and use tax records by City employees (designed by
position title) and that a Third Amendment to Agreement to extend the contracted period
with MuniServices, LLC for tax reporting, analysis and recovery services.
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action.
FISCAL IMPACT
The fees for the services that MuniServices will render are deducted from Sales Tax
Revenue. The fees will not exceed $10,000 for the STARS and GRIA reporting systems,
inclusive of annual CPI adjustment of not less than two percent (2%) or greater than four
percent (4%), for each of the two years of the amended agreement. Fees paid for
recovered sales tax and other revenues shall not exceed 13% of the amount recovered.
Payments made to MuniServices for recovered revenues will be recognized when the
fees related to MuniServices auditing and reporting activities are incurred. A contingency
of $60,000 shall be available for the life of the Third Amendment to Agreement to cover
other consulting services the City may request via the Change Order process.
EXHIBIT(S)
1. Resolution
2. Third Amendment to Agreement with MuniServices, LLC
Submitted By: Kathryn Downs, FMSA Executive Director
Approved By: Kristine Ridge, City Manager
EXHIBIT 1
RESOLUTION NO. 2022-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA ANA AUTHORIZING THE EXAMINATION OF SALES AND
TRANSACTIONS AND USE TAX RECORDS
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA ANA, AS
FOLLOWS:
Section 1. The City Council of the City of Santa Ana conclusively finds, determines
and declares as follows:
WHEREAS, pursuant to Ordinance No. NS-2952 of the City of Santa Ana ("District") and
Section 7270 of the Revenue and Taxation Code, the District entered into a contract with the
California Department of Tax and Fee Administration ("CDTFA") to perform all functions
incident to the administration and operation of the Transactions and Use Tax Ordinance; and,
WHEREAS, the District deems it desirable and necessary for authorized representatives
of the District to examine confidential transactions and use tax records of the CDTFA pertaining
to transactions and use taxes collected by the Board for the District pursuant to that contract;
and,
WHEREAS, Section 7056 of the Revenue and Taxation Code sets forth certain
requirements and conditions for the disclosure of CDTFA records and establishes criminal
penalties for the unlawful disclosure of information contained in or derived from, the
transactions and use tax records of the Board.
NOW, THEREFORE, it is hereby ORDERED, RESOLVED and DETERMINED, as follows:
Section 2. The Executive Director of Finance and Management Services, Assistant
Director of Finance and Management Services, Treasury and Customer Services Manager,
Budget and Research Manager, Senior Management Analyst, Revenue Supervisor, or other
officer or employee of the District designated in writing by the Executive Director of Finance
and Management Services to the CDTFA is hereby appointed to represent the District with
authority to examine transactions and use tax records of the CDTFA pertaining to transactions
and use taxes collected for the District by the CDTFA pursuant to the contract between the
District and the CDTFA. The information obtained by examination of CDTFA records shall be
used only for purposes related to the collection of the District's transactions and use taxes by
the CDTFA pursuant to the contract.
Section 3. The Executive Director of Finance and Management Services, Assistant
Director of Finance and Management Services, Treasury and Customer Services Manager,
Budget and Research Manager, Senior Management Analyst, Revenue Supervisor or other
officer or employee of the District designated in writing by the Executive Director of Finance
and Management Services to the CDTFA is hereby appointed to represent the District with
authority to examine those transactions and use tax records of the Board for purposes related
to the following governmental functions of the District:
a) detection of misallocations and deficiencies
b) revenue tracking and economic development
c) forecasting and budget related functions
d) comparative audit of local jurisdiction taxes
The information obtained by examination of Board records shall be used only for those
governmental functions of the District listed above.
Section 4. MuniServices, LLC is hereby designated to examine the transactions and use
tax records of the CDTFA pertaining to transactions and use taxes collected for the District by
the Board. The person or entity designated by this section meets all of the following conditions:
a) has an existing contract with the District to examine those transactions and use tax
records;
b) is required by that contract to disclose information contained in, or derived from those
transactions and use tax records only to the officer or employee authorized under
Section 2 or Section 3 of this resolution to examine the information;
c) is prohibited by that contract from performing consulting services for a retailer during the
term of that contract;
d) is prohibited by that contract from retaining the information contained in, or derived from
those transactions and use tax records after that contract has expired.
BE IT FURTHER RESOLVED that the information obtained by examination of Board
records shall be used only for purposes related to the collection of District's transactions and
use taxes by the Board pursuant to the contracts between the District and Board.
Section 5. This resolution supersedes all prior transactions and use tax resolutions of the
City of Santa Ana adopted pursuant to subdivision (b) of Revenue and Taxation Code Section
7056.
Section 6. This Resolution shall take effect immediately upon its adoption by the City
Council, and the Clerk of the Council shall attest to and certify the vote adopting this Resolution.
-2-
ADOPTED this day of
APPROVED AS TO FORM:
Sonia R. Carvalho
City Attorney
By: /a -
Ryan . H dge
Assistant City Attorney
AYES:
NOES:
ABSTAIN:
NOT PRESENT
Councilmembers:
Councilmembers:
Councilmembers:
Councilmembers:
, 2022.
Vicente Sarmiento
Mayor
CERTIFICATION OF ATTESTATION AND ORIGINALITY
I, DAISY GOMEZ, Clerk of Council, do hereby attest to and certify the attached
Resolution No. 2022- to be the original resolution adopted by the City Council of the
City of Santa Ana on , 2022.
Date:
Clerk of Council
City of Santa Ana
-3-
EXHIBIT 2
Third Amendment to Consultant Services Agreement with MuniServices, LLC
THIS THIRD AMENDMENT TO CONSULTANT SERVICES AGREEMENT ("Agreement") is
made and entered into on this 21st day of June, 2022, by and between MuniServices, LLC, a
Delaware limited liability company (hereinafter "Consultant"), and the City of Santa Ana, a charter
City and municipal corporation organized and existing under the Constitution and laws of the State
of California (hereinafter "City"), collectively "the Parties".
RECITALS
A. On October 4, 2016, the City and Consultant, pursuant to a Request for Proposals process,
entered into that certain agreement entitled "Consultant Services Agreement" (Agreement #A-
2016-290) (hereinafter referred to as "said Agreement") for Sales and Use Tax Recovery,
Reporting, Analysis, and Legislative/State Agency Liaison and Implementation Monitoring
Services.
B. On June 19, 2018, the City and Consultant agreed to a First Amendment to said Agreement
(#A-2018-161) to add provisions relating to Change Orders, and to identify additional
consulting services to include, but not be limited to: potential transaction and use taxes,
potential business license taxes and/or potential medical marijuana and/or cannabis taxes or
operating agreement fees (as applicable), and to set forth the renewal Term of said Agreement
for a period of two and one-half (2 %) years, effective July 1, 2018 through December 31,
2020.
C. On January 15, 2019, the City and Consultant agreed to a Second Amendment to said
Agreement (#A-2019-017) to increase the Scope of Services and Compensation to expressly
include Transactions and Use Tax Recovery, Reporting, and Analysis and to amend the Term
of said Agreement for a period of one and one-half (1 '/2) years, effective January 1, 2021
through June 30, 2022.
D. The Parties hereto now desire to extend the Term of said Agreement for an additional period
of two (2) years, effective July 1, 2022 through June 30, 2024.
E. The Parties hereto now also desire to amend said Agreement to conform Compensation to
an annual amount not to exceed $10,000 covering the web -based reporting systems Sales
Tax Analysis Reporting Systems ("STARS") and Geographic Revenue Information Application
Systems ("GRIA"); plus an annual Cost Price Index ("CPI") adjustment not less than two
percent (2%) or greater than four percent (4%); plus a 13% of recovered sales tax of revenues
over the life of said Agreement, with a contingency of up to $60,000 to cover other consulting
services.
NOW THEREFORE, in consideration of the mutual and respective covenants and promises
hereinafter contained and made, and subject to all of the terms and conditions of said Agreement
as hereby amended, the Parties hereto do hereby agree as follows:
1. Section 1. — Scope of Services to read as follows:
a. Consultant, or Consultant's subcontractor(s), will provide City with the consulting services
described in EXHIBITS A and C, which are attached hereto and incorporated by reference.
Consultant, or Consultant's subcontractor(s), shall provide said services at the time, place,
and in the manner specified in EXHIBITS A and C.
b. Consultant, or Consultant's subcontractor(s), shall furnish at its own expense all labor,
materials, equipment and other items necessary to carry out the terms of this Agreement.
2. Section 2. — Compensation is amended to read as follows:
a. Upon the Effective Date of this Third Amendment, City will pay Consultant as outlined in
EXHIBITS B and D, incorporated and included herein. The fees will not exceed $10,000
for the STARS and GRIA reporting systems, plus an annual CPI adjustment of not less
than two percent (2%) or greater than four percent (4%).
b. Fees paid for recovered sales tax and/or other associated recovered revenues shall not
exceed thirteen percent (13%) of the amount recovered. Such fees are not chargeable
against contingency monies but are revenues directly payable from recovered sales tax.
Payments made to Consultant for recovered revenues will be recognized when the fees
related to Consultant auditing and reporting activities are incurred.
c. In addition, a contingency amount of $60,000 shall be available for the Term of said
Agreement to cover payment of additional consultant services the City may request via
the Change Order process, as set forth under Section 1. — Scope of Services of said
Agreement.
d. Payment by CITY shall be made within forty-five (45) days following receipt of proper
invoice evidencing work performed, subject to City accounting procedures and proof of
insurance as set forth in Section 3-9. Payment need not be made for work which fails to
meet the standards of performance set forth in the Recitals which may reasonably be
expected by CITY.
3. Section 3. - General Provisions., subsection 3-1., Term of the Agreement is amended to read
as follows:
3-1. - Term of the Agreement: The renewal term for the provision of consultant services
under said Agreement shall be for a period of two (2) years, effective July 1, 2022 through
June 30, 2024, , if neither party has terminated said Agreement in accordance with section
3-2.
4. The effective date for the application of amendments to said Agreement relating to "Scope of
Services", "Compensation", and "Term" shall be July 1, 2022 ("Effective Date").
5. Where applicable, in accordance with state law, relevant references to the California State
Board of Equalization ("BOE") within said Agreement, including all exhibits attached hereto and
incorporated by reference, shall now refer to the California Department of Tax and Fee
Administration ("CDTFA").
6. Except as hereinabove modified, the terms and conditions of said Agreement remain
unchanged and in full effect.
(Signatures on following page}
IN WITNESS WHEREOF, the Parties hereto have executed this Third Amendment to Agreement
the date and year first above written.
ATTEST:
Daisy Gomez
Clerk of the Council
APPROVED AS TO FORM:
CITY ATTORNEY
Sonia I arvalho
Rya, O. LI-lodge
Assistant City Attorney
RECOMMENDED FOR APPROVAL:
kb"
Kathryn Downs (Jun 6, 2D2116.29 PDT)
Kathryn Downs, Executive Director
Finance and Management Services Agency
CITY OF SANTA ANA
Kristine Ridge
City Manager
CONSULTANT
Lnp�
Carl Kumpf
Chief Financial Officer
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.
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 or transaction tax) which is collected by the vendor who in turn remits it to the CDTFA, 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 CDTFA, 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 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 CDTFA 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
& use tax and transactions & use tax revenue for the City. MuniServices' QDR audits focus on those accounts where MuniServices
observes a substantial decline in the sales & use and 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 QDRs 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 or transactions tax revenue for three quarters prior
to the CDTFA 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 sales & use tax and transactions and use tax records of the CDTFA
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. With reference to the City's adoption of a transactions and use tax 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 & use and transactions & 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 & use and 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
Burns Revenue and Taxation Code, shall continue until final payment for all services rendered hereunder.
Deliverables
SUTA Detection and Documentation
MuniServices shall represent the City for purposes of examining CDTFA records pertaining to sales & use tax and transaction &
use tax to identify errors and omissions. MuniServices' procedures for detecting and documenting misallocations are as follows:
1. Review applicable provisions of the City's municipal code and ordinance adopted by the City to determine
applicability.
2. Procure a computer tape of sales & use and transactions & use tax permit records from the CDTFA.
3. Analyze sales tax and transactions tax distribution reports provided by the CDTFA for five or more of the
most recent consecutive quarters.
4. Clean-up, standardize and computerize data from City's quarterly sales tax/transactions tax distribution
reports provided by CDTFA for previous quarters (as applicable), current quarter (as applicable) and each
future quarter service is provided.
5. Prepare an aggregated list of business entities on electronic media; this list is derived from multiple
private and public sources (hard copy and electronic), including specialized business listings and
directories, the City's sales & use tax and transactions & use payment files, and an electronic copy of the
City's Business License Tax registry, updated no less than twice per year.
6. Clean, standardize and integrate, in address -order, each entity's business name, address and payment file
information, to eliminate redundancies, using MuniServices' proprietary software.
7. Physically canvas commercial/industrial area within the City's borders.
8. Develop a target list of potential point of sale/use reporting errors/omissions based on:
a. An electronic comparison of MuniServices' comprehensive inventory against the CDTFA's quarterly
distributions for the City, and
b. An analysis of each potentially misallocated account based on proprietary guidelines established by
MuniServices.
9. Meet with designated City official(s) to review service objectives and scope, MuniServices workplan
schedule, public relations and logistical matters.
10. Contact personnel in sales, operations and/or tax accounting at each target business to determine
whether a point-of-sale/use reporting error exists. (Note: this is accomplished with the highest regard to
discretion and professional conduct. MuniServices' allocation audits are predicated on a non -controversial,
constructive public relations approach which emphasizes the importance of each business to the City and
the mutual benefits of correcting reporting errors.)
11. Provide to the City and CDTFA reports addressing each taxpayer reporting error individually, including the
business name, address, telephone number, California sales tax permit number, individuals contacted,
date(s) of contact, nature of business, reason(s) for error, recommended corrective procedure and, if
available, estimated sales & use tax and transactions and use tax revenue which should be forthcoming to
the City.
12. MuniServices may also provide suggested language for letters to be sent to the taxpayers and/or CDTFA
from the City (or from MuniServices on behalf of the City) urging cooperation in promptly correcting the
distribution error.
13. Respond to negative findings by CDTFA with timely reconfirmation documentation in order to preserve the
City's original dates of knowledge.
14. Receive and process registration control record information monthly.
15. Receive and process sales tax distribution reports quarterly.
16. Coordinate with the taxpayer and CDTFA to make the necessary corrections and collect eligible back
quarter's amounts.
17. Monitor and analyze the quarterly distribution reports with an audit focus on the following:
a. Accounts with previously reported point-of-sale/use distribution errors to ensure that the
corrections are madefor current quarters and all eligible back quarters.
b. Major accounts comprising 90% or more of the City's total sales tax and transactions tax
revenue to identify any irregularities or unusual deviations from the normal pattern (e.g. negative
fund transfers, significant decreases, unusual increases, etc.) and ensure that the City is not
receiving less revenue than it is entitled to.
c. Those accounts receiving deficiency assessments to ensure that the City receives its local
allocation
18. Identify opportunities for the City to recover local allocation on purchase transactions subject to use tax.
Prepare the necessary documentation to facilitate recovery, including assistance in preparing and filing the
returns.
SUTA Detection Timina Considerations
For each misallocated account detected, MuniServices will coordinate with the business and CDTFA to make the
necessary corrections plus retroactive adjustments for eligible amounts of sales & use tax and transactions & use tax
improperly distributed in prior quarters. MuniServices coordinates and communicates between typically four
parties; sales/operations personnel at the taxpayer's local operation, tax personnel at the company's corporate
headquarters, and CDTFA personnel and the in-state/out-of-state district offices. Correction of the account is
considered to have been made once the payments on identified taxpayer accounts are being properly allocated by
the taxpayer to the City in the period in which the payment was made.
As needed, MuniServices will represent the City before state officials, boards, commissions and committees for the
purpose of correcting sales tax distribution errors that have deprived the City of revenue to which it is entitled.
EXHIBIT B
COMPENSATION
Sales & Use and Transactions and Use Tax -Audit Services (SUTA) Services
What the City will pay MuniServices
During the term of this Agreement MuniServices' compensation for the Sales & Use Tax and Transactions & Use Tax
Audit Service shall be a 13% fee. This fee applies to revenue received for six quarters beginning with the quarter in
which the Date of Correction falls and all eligible prior quarters back to and including the three quarters prior to the
Date of Knowledge quarter for Bradley -Burns sales tax revenues and all eligible prior quarters back to and including
all corrected quarters prior to the Date of Knowledge quarter for district tax revenues. As used herein, the Date of
Knowledge is the quarter during which MuniServices notifies the CDTFA of the existence of a misallocation. As used
herein, the Date of Correction refers to the quarter in which the taxpayer has correctly reported the local tax and
the CDTFA distributes the local tax properly to City based on the taxpayer's reporting. For QDR Misallocations
detected and corrected, MuniServices' compensation shall only include the quarters for which the misallocation
actually occurred.
For clarification and to encourage communication and collaboration between MuniServices and the City,
MuniServices shall be entitled to full payment of all compensation as provided herein even if any one or more of
City, its personnel, agents, or representatives, or any third party or parties provide(s) information to MuniServices
that assists or is used by MuniServices in the identification, detection, and correction of point -of- sale distribution
errors or the reporting and/or misallocation of revenue.
In the event that the City identifies, documents, and notifies the CDTFA of a point -of -sale distribution error, reporting
error or misallocation as those terms are used herein, the City will notify MuniServices of the City's discovery no
later than ten days after the Date of Knowledge as defined in Title 18 of the California Code of Regulations,
Regulation 1807 ("Date of Knowledge"). The City also agrees to notify MuniServices promptly if it is working on a
local tax misallocation issue independently of MuniServices and to maintain and promptly make available to
MuniServices on request contemporaneous documentation of such work and its timing so we do not duplicate work.
Invoicing/Billing
MuniServices will invoice City quarterly based on past and/or prospective compliance secured on behalf of City.
Invoices are due and payable within forty-five (45) days upon receipt.
All expenses incurred by MuniServices in providing the Sales Tax service are the sole and exclusive responsibility of
MuniServices, except those expenses that receive prior written approval by City.
Additional Consulting Services
City may request via the Change Order process that MuniServices, and/or MuniServices' subcontractor(s), provide
additional optional consulting services within the scope of the Agreement any time during the term of the
Agreement. If MuniServices and City agree on the scope of the additional consulting services requested, then
MuniServices, or MuniServices' subcontractor(s), shall provide the additional consulting services on a Time and
Materials basis.
Standard Hourly Rates: Depending on the personnel assigned to perform the work, MuniServices' standard hourly
rates range from $75 per hour to $200 per hour.
The following are sample hourly rates based on the job classification:
0 Principal: $200 per hour
• Client Services: $175 per hour
• Information Technology (IT) support: $150 per hour
Operational Support:
o Director or Manager: $175 per hour
o Senior Analyst: $125 per hour
o Analyst: $100 per hour
o Administrative: $75 per hour
These additional consulting services will be invoiced at least monthly based on actual time and expenses incurred.
All reimbursable expenses shall receive prior approval from the City and shall be reimbursed at cost to MuniServices.
Completion of Services
Notwithstanding any other provision of this Agreement, because Consultant's services performed hereunder result
in corrections of misallocations and other revenue after cessation of services by Consultant for City, City agrees that
with regards to misallocations identified to the CDTFA whose Date of Knowledge occurred during Consultant's
performance of services for City or for other revenue resulting from Consultant's actions taken during the term of
this Agreement, that City's obligation to pay Consultant in accordance with the compensation language of this
Agreement shall survive expiration or termination of this Agreement for any reason. Additionally, notwithstanding
any other provision of this Agreement, if this Agreement is terminated or expires, Consultant shall continue to pursue
corrections of accounts identified during the term of this Agreement that have not been corrected by the CDTFA as
of the effective date of termination or expiration. The period after termination during which Consultant is pursuing
correction of accounts identified before termination is referred to as the "completion period." City shall compensate
Consultant in accordance with the compensation language of this Agreement for corrected misallocations that result
from Consultant's efforts during the completion period. City will also take all necessary steps to allow Consultant to
continue to receive the required information from the CDTFA during this completion period.
EXHIBIT C
SCOPE OF WORK
SALES & USE TAX AND TRANSACTIONS & USE TAX -ANALYSIS & REPORTING SERVICE (STARS)
1. Stars Reports. Within thirty (30) days of receipt of monthly and/or quarterly sales tax/transactions tax data
from the applicable governmental authorities, Consultant shall provide City with electronic access to updated
STARS Reports.
1.1 General Reporting Contents. The STARS Reports are dependent on availability of data received from
applicable governmental authorities. The online STARS Reports allow City's staff to interact with sales
tax/transaction tax data from the permit level to citywide level; on a cash or economic basis; by quarter
or year; and by classification grouping include economic category and segment. The STARS Reports
provide City with access to sales & use tax and transactions & use data online and via mobile devices. In
addition, reports can be exported to Microsoft Excel or Adobe PDF formats. The reports available may
include:
• A Cash Dashboard.
• An Economic Dashboard.
• An Economic Change Report.
• A business look -up report.
• A Taxpayer Ranking Report.
• Geo-Areas.
1.2 Sales Tax/Transactions Tax Forecast. Consultant also provides a Sales Tax Forecast that identifies historical
sales tax and projected sales tax for pessimistic, most likely and optimistic scenarios including
Transactions and Use Taxes (as applicable).
1.3 GRIA Application. Consultant will include the Geographic Revenue Information Application (GRIA), as part
of the STARS and forecasting service and at the same cost. The GRIA will provide and separately present
combined geographically based (GEO/GIS) revenue information to include:
• Sales and Use Tax
• Transaction and Use Tax (as applicable)
• Secured and Unsecured Property Tax
• Hotel Visitors' Tax
• Documentary Stamp Tax (Property Transfer Tax)
• Business License Tax (including Business Improvement District Assessments/Charges)
• Medical Marijuana Tax
• Adult -Use Cannabis Retail Operating Agreement Fees; and
• Commercial Cannabis Operating Agreement Fees (to include, but not limited to: Cultivation,
Manufacture, Distribution, and Testing)
GRIA data became fully available to the City on January 1, 2020 and is subject to MuniServices
receiving certain City data matching:
a. City Hotel Visitors' Tax data to City Business License Tax accounts; and
b. City Business License Tax account data to California Department of Tax and Fee
Administration Sales and Use Tax Permits.
c. City Adult -Use Cannabis Retail Business Operating Agreement account data.
d. City Commercial Cannabis Operating Agreement account data (to include, but not limited to:
Cultivation, Manufacture, Distribution, and Testing).
To be included in the GRIA, City data must be received in a mutually agreeable format at least
thirty (30) calendar days prior. MuniServices and City shall update (GEO/GIS) revenue
information data on a quarterly basis (or more often as may be mutually agreeable).
1.4 Accuracy. The STARS Reports rely on information provided by applicable governmental authorities and
third -parties. Consultant will endeavor to verify, remove redundancies, or otherwise clean or standardize
the information provided by governmental authorities or any third parties.
1.5 Timing. Consultant's obligation to provide the STARS Reports is conditioned on City's delivery of required,
signed documentation to Consultant to access the proper data from the applicable governmental
authorities.
1.6 Paper reports. Some of the reports may be delivered in paper -based or excel formats while our online
report platform continues to be expanded. For example, Geo Area reports are currently still being
provided in paper format. As we expand the online portal, additional reports will become available on
your home page.
CityAssistance
1. Confidentiality. The information provided to the City in the STARS Reports is confidential. It is not open to public
inspection. A City may use the information only for lawfully permitted purposes. City shall not distribute the
STARS Reports to any person unless that person is legally entitled to access the information in the STARS Reports,
or except as may otherwise be required by law or court order.
Consultant is authorized by this Agreement to examine sales & use tax and transactions & use tax records of the
California Department of Tax and Fee Administration (CDTFA). Consultant is required to disclose information
contained in, or derived from, those sales & use tax and transactions & use tax records only to an officer or
employee of the City who is authorized by resolution to examine the information. Consultant is prohibited from
performing consulting services for a retailer during the term of this Agreement. Consultant is prohibited from
retaining the information contained in, or derived from, those transaction, sales, and use tax records, after this
Agreement has expired.
2. Data. In order for Consultant to provide the STARS Reports, the City will need to deliver to Consultant the signed
documents/authorizations required to access the proper data from the applicable governmental authorities as
may be required by law.
3. Additional Terms.
a. License. Consultant grants to City a license for each of City's designated users to access the New STARS
reports service for so long as this Agreement is in effect. Each of City's designated users must be submitted
in writing to Consultant. Consultant will provide the user with the necessary log -in information. Any
passwords issued for this service may only be used by the person to whom the password is issued; sharing of
passwords is STRICTLY PROHIBITED. City has the obligation to protect those passwords.
b. Limitations of Liability. Consultant is not responsible for any breach of data resulting from City's failure to
protect passwords or systems used to access the Service. Consultant does not warrant that the service is
error free. CONSULTANT DISCLAIMS ALL OTHER WARRANTIES WITH RESPECT TO THE SOFTWARE, EITHER
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NOW INFRINGEMENT OF THIRD PARTY RIGHTS. Some jurisdictions
do not allow the exclusion of implied warranties or limitations of how long an implied warranty may last, or
the exclusion of limitation of incidental damages, so the above limitations or exclusions may not apply to City.
In no event shall Consultant or its licensors, suppliers, or licensees be liable to City for any consequential,
special, incidental, or indirect damages of any kind arising out of the performance or use of the service, even
if Consultant has been advised of the possibility of such damages.
c. Non -disclosure. City's use of the New STARS services is conditioned on City's agreement not to make the
service or any of output of the system available to Consultant's competitors. Nothing in this provision
prohibits the City from exporting data and formatting it for its own use or from making documents marked
as 'public' known to the public.
EXHIBIT D
COMPENSATION
Sales & Use Tax and Transactions & Use -Analysis & Reporting Service (STARS)
Base Package Annual fee. During the term of this Agreement City shall pay Consultant an annual fee of $10,000
("annual fee") payable in four equal quarterly payments as shown below, proratable on a quarterly basis for any
contractual period less than twelve months. This includes a mutually agreeable number of Geo Areas. Consultant
will invoice the City on a quarterly basis. Invoices are due and payable within forty-five (45) days of receipt. If
this Agreement is terminated ahead of its agreed to term for any reason, the City remains obligated to pay
Consultant the quarterly payments of the annual fee for the quarters before the effective date of termination.
Adjustments. The Annual Fee shall be adjusted at the beginning of each calendar year by the percentage change
in the Consumer Price Index - Los Angeles -Long Beach -Anaheim, CA (formerly Los Angeles- Riverside -Orange
County) (CPI-U) as reported by the Bureau of Labor Statistics. The initial Consumer Price Index used for the first
CPI adjustment will be the Consumer Price Index - Los Angeles -Long Beach- Anaheim, CA (formerly Los Angeles -
Riverside -Orange County) (CPI-U) for the month in which the agreement is fully signed with the first adjustment
to occur at the beginning of the Calendar year following the first full calendar year of service. For instance, if the
agreement is signed in April, year 1, the adjustment would not occur until January of year 3. The adjustments
thereafter will be based on the CPI-U from December of the prior calendar year. Each Annual Fee adjustment
shall not be less than two percent (2%) or greater than four percent (4%).
3. Additional Paper Copies. Consultant shall provide City additional paper, bound copies of the STARS Reports
upon City's request at the rate of $200 annually per additional copy, payable by City in quarterly installments of
$50 per additional copy.
4. Additional Consulting. City may request via the Change Order process that MuniServices, and/or MuniServices'
subcontractor(s), provide additional optional consulting services within the scope of the Agreement any time
during the term of the Agreement. If MuniServices and City agree on the scope of the additional consulting
services requested, then MuniServices, or MuniServices' subcontractor(s), shall provide the additional consulting
services on a Time and Materials basis.
Standard Hourly Rates: Depending on the personnel assigned to perform the work, Consultant's
standard hourly rates range from $75 per hour to $200 per hour.
The following are sample hourly rates based on the job classification:
• Principal: $200 per hour
• Client Services: $175 per hour
• Information Technology (IT) support: $150 per hour
• Operational Support:
o Director or Manager: $175 per hour
o Senior Analyst: $125 per hour
o Analyst: $100 per hour
o Administrative: $75 per hour
These additional consulting services will be invoiced at least monthly based on actual time and expenses
incurred.
MuniServices_Third Amendemnt with Exhibits(2
05892.)_Signed
Final Audit Report
Created: 2022-06-06
By: Kristin Andrade (kandrade@santa-ana.org)
Status: Signed
Transaction ID: CBJCHBCAABAAR5uXCpJGFixONIB8KGXNvWZEImwE321F
2022-06-06
"MuniServices_Third Amendemnt with Exhibits(205892.)_Signed
" History
%W Document digitally presigned by Conga
2022-06-06 - 7:13:38 PM GMT- IP address: 98.153.69.210
Document created by Kristin Andrade (kandrade@santa-ana.org)
2022-06-06 - 11:26:19 PM GMT- IP address: 98.153.69.210
Document emailed to Kathryn Downs (kdowns@santa-ana.org) for signature
2022-06-06 - 11:26:38 PM GMT
Email viewed by Kathryn Downs (kdowns@santa-ana.org)
2022-06-06 - 11:29:00 PM GMT- IP address: 104.28.85.116
Document e-signed by Kathryn Downs (kdowns@santa-ana.org)
Signature Date: 2022-06-06 - 11:29:42 PM GMT - Time Source: server- IP address: 174.193.211.253
Agreement completed.
2022-06-06 - 11:29:42 PM GMT
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