Oklahoma losing out on millions through uncollected taxes
OKLAHOMA CITY (KOKH) —
Oklahoma is leaking. The leaking is in the form of millions of dollars the state should be receiving but is currently not receiving. The money is from alcohol sales and economists say while there are proposals to change how alcohol is taxed, the real money maker might just be enforcing the current tax laws.
“I think if there was increased compliance, they might discover where some of that money was going,” said Vance Gregory, the owner of Edmond Wine Shop. Gregory has been in the business since 1973 and said the talk of changing how alcohol is taxed could hurt his business.
Right now before a bottle comes to the store there is a per volume tax called an excise tax that is collected.
“The [excise] tax is included in a cost that I pay,” Gregory explained.
When a bottle leaves the shelf it is subject to a sales tax. The money collected from customers is put in one account and at the end of each month Gregory calculates what he owes the state for sales tax and writes one check.
However, when economist Jeremy Oller studied the amount of alcohol being purchased on a wholesale level and compared it to what was being reported as sold, he found something missing. There was a nearly $3 million discrepancy.
“[The study] is assuming a 20-percent spill rate meaning that 20-percent of the alcoholic beverages will be lost,” Oller told FOX 25.
However, 20-percent spillage would be fairly disastrous to any small business because it would mean one out of every five bottles was broken. Oller says the study took a conservative approach with the numbers and when the spill rate was calculated at a more realistic 5-percent, the amount of missing tax money jumped to more than $6 million.
The bigger surprise came when examining other liquor sales
Oller found the state is missing out on $19 million from alcohol sales. He told FOX 25 that figure is also a conservative estimate because it too factored in a 20-percent spill rate for other alcohol merchants.
“It could be misreporting; it could be miscalculation or it could be even worse than that it could be someone just has bad intentions in respect to reporting the taxes,” Oller said.
The economic study was commissioned to find out what would happen if the state’s alcohol tax structure was changed. It sought to determine if it would bring in new money or cost money by changing where the taxes were collected.
“We don't need new taxes,” Oller explained, “This is money that is already there.”
Oller said the real take away lesson for legislators and policy makers is to make cheating on taxes less attractive and increase enforcement of current tax laws.
Essentially raise the risk of getting caught and lowering the potential rewards of getting away with it.
“The first and easiest thing you can do is increase fines,” Oller said, “It is simple; doesn't require any cost doesn't impose any tax payer burden and if someone is violating you collect more money in that way.”
Increased enforcement though would require the state to make an up-front investment in order to hire more tax investigators. Though, according to Oller’s study, it would pay for itself many times over.