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June 25, 2013

Council to discuss possible sales tax refund to state

GREENVILLE — City of Greenville officials intend to discuss tonight whether the city will have to repay millions of dollars in sales tax revenue to the State of Texas.

The Texas Supreme Court recently ruled the State of Texas should have exempted some of the sales taxes it collected from a medical firm, meaning those funds should be repaid.

The City Council is scheduled to convene in executive session this evening concerning the issue and any potential litigation arising from it. The Council is set to meet in regular session starting at 6 p.m. in the Municipal Building, 2821 Washington Street.

In March 2012, the State Comptroller’s Office notified the city that it would postpone collection of more than $2.7 million in sales tax revenue that it had previously indicated the city would be required to refund under a sales tax exemption expanded significantly by the Austin Court of Appeals.

The Texas Supreme Court agreed to hear two lawsuits between the State Comptroller’s Office and Health Care Services Corporation. Former City Attorney Brent Money 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.

“We are hopeful that the Texas Supreme Court will overrule the Austin Court’s judicially-created exemption by strictly interpreting the Tax Code, which would make any repayment unnecessary,” Money said at the time.

However 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”).

Tonight’s City Council executive session is being conducted, in part, “regarding repayment of taxes erroneously collected by Texas Comptroller and potential litigation regarding repayment terms.”

Should the Council take any action concerning the item, it would return to open session to do so.

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