Sales Tax Slice: Public Shaming Becomes More Prevalent in States’ Tax Collection Arsenals

It’s that time of year again… the time when California’s most delinquent sales and use tax offenders are publicly outed by the California State Board of Equalization.  On Sept. 5th, the board released the top 500 delinquent sales and use tax accounts over $100,000. The amount of sales and use tax owed by the highest offender is a whopping $7,987,914.23.  Other states are experimenting with this method as well, with Vermont being the most recent to jump on the embarrassment bandwagon.

California’s list includes the names of the delinquent individuals or businesses, addresses and amounts owed. It is even accompanied by an interactive map. The Golden State’s top offender’s list began in 2007, when California passed legislation requiring the board to list the top 250 delinquent sales and use tax accounts each quarter. But in 2011, the law was amended to require that the top 500 past due accounts be named.

Each taxpayer that makes the list is notified 30 days before the list is posted, giving them one last chance to make payment arrangements before their status is made public. The board is required to remove those accounts that have been taken care of by payment arrangement, bankruptcy, litigation, or appeal. Each taxpayer also has the option of requesting that any full or partial payments be posted on the list. Many other states including New York, New Jersey, Connecticut and Delaware also post lists of their most delinquent taxpayers; however, unlike California, the lists are not exclusive to sales and use tax. New York lists the top 250 individual and business delinquent taxpayers, and currently topping the business list is a company that owes over $11 million in past due sales and use tax. 

In June 2014, Vermont enacted a new law, Act 174, granting the commissioner the authority to list the top 100 individual and business taxpayers with the highest unpaid tax accounts.  In a Sept. 8thnews release, the Vermont Department of Taxes said it will begin publishing the lists by the end of the year.

“Although most taxpayers voluntarily pay their taxes on time and in full, we do have a number of taxpayers who have high tax bills outstanding, even after repeated attempts by the department to collect. This new law gives us another tool to compel taxpayers to pay what they owe,” Tax Commissioner Mary Peterson said in the release.

So does public shaming really work to recover tax debts from taxpayers? Well, the California SBOE reports that since it began posting the list, it has received a total of $12.2 million from 145 qualifying taxpayers. Out of those 145 taxpayers, 120 set up an installment agreement, and 25 paid their past due balance in full. As long as revenue departments continue to recover a chunk of the lost revenue due to the posting of the lists, it’s unlikely that the shaming will stop any time soon.

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Do you think it’s fair to list the top delinquent taxpayers publicly?

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