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Local News

June 30, 2013

City to repay millions in sales tax

GREENVILLE — The City of Greenville intends to repay millions of dollars in sales tax revenue it owes to the State of Texas.

It may be decades before the total is paid off, as the terms of the payback are still being worked out, according to Interim City Manager/Director of Public Works Massoud Ebrahim.

Ebrahim spoke with the City Council last week concerning the issue and any potential litigation arising from it. While the bulk of the discussion occurred during an executive session as part of Tuesday’s regular agenda, prior to going into the executive session Ebrahim was addressing some of the challenges he is facing in drafting the upcoming City of Greenville budget. One of the challenges was having to come up with $84,000 a year to refund the sales tax revenue.

Ebrahim said Friday the figure he mentioned was based on paying the total back over some 30 years.

“But we haven’t settled the case with the State of Texas yet, and we may be asking for a longer period,” Ebrahim said.

A recent court decision has left the city in the position of having to pay back money it has already spent.

Sales taxes are one of the two main sources of revenue, along with property taxes, which feed the City of Greenville’s general fund. A rededication of a percentage of the sales tax revenue goes toward the 4A economic development corporation.

In March 2012, the TexasComptroller’s Office notified the City of Greenville that it would postpone collection of more than $2.7 million in sales tax revenue. The state agency had previously indicated the city would be required to refund the money, based on a sales tax exemption expanded significantly by the Austin Court of Appeals.

The Texas Supreme Court agreed to hear arguments in two lawsuits between the State Comptroller’s Office and Health Care Services Corporation. Former City Attorney Brent Money had filed a brief on behalf of the Texas Municipal League (TML), Texas City Attorney’s Association (TCAA) and the City of Greenville to represent the interests of Texas cities and counties in the two lawsuits, amid concerns the issue could cost the State of Texas more than $600 million in sales tax refunds and decrease revenue by approximately $75 million annually.

Earlier this month, the Texas Supreme Court ruled that Health Care Services Corporation, successor to Blue Cross and Blue Shield of Texas, Inc., could claim a sale-for-resale exemption on tangible personal property and taxable services purchased to fulfill contracts with the federal government to administer Medicare Part A, Medicare Part B, and the Federal Employees Health Benefit Program (“FEP”).

Ebrahim said there is still a chance the city could take even longer to pay off the money.

“If it goes 40 years, it is going to be even less each year, but nothing has been finalized,” Ebrahim said.

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