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Businesses Owe Thousands In Equipment Tax County Has Done Little To Collect

Sun., May 25, 1997

Spokane businesses owe hundreds of thousands of dollars in taxes that the county has done little to collect.

The unpaid taxes on business equipment - computers, desks and other items - means there’s less money for schools, library books and road repairs. Ultimately, other taxpayers must fork over more for those services.

The county treasurer’s office did not have anyone to track down scofflaws from 1991 until late last year. The assessor’s office still has no one to hold businesses accountable, despite a 1996 state review that said audits are needed.

Last year, the county expected to collect $12.9 million in the misnamed “personal property” tax. About $400,000 is overdue, including $23,000 that would have gone to road maintenance and $96,000 to schools.

Many of the bills eventually will be paid, with late fees. But in a typical year, the county writes off about $200,000, said county Treasurer Linda Wolverton.

By comparison, Snohomish County has more businesses and writes off only $15,000, Wolverton said.

Now, Spokane County is telling some businesses their equipment may be seized and sold unless they pay their bills. Last year, Wolverton hired an attorney to work on collections full time.

But in many cases, it’s difficult to say how much actually is owed. Some companies that the county says are past due went out of business years ago. Others say they’ve been grossly overbilled.

The fault lies both with the county and the companies, which are required by state law to report the value of their equipment and let the county know if they go out of business.

Who owes

Many businesses with bills past-due have gone bankrupt. They include Spokane PresTo-Log, which owes $97,000, and Ernst Home Center, which owes $25,326.

In such cases, the county can do little but file a claim and wait for a judge to order it paid, said Tom McGarry, newly hired collections specialist at the county treasurer’s office.

But there are hundreds of businesses still in existence that owe anywhere from a few hundred dollars to tens of thousands.

The operator of three Spokane Montessori schools owes nearly $30,000. Barbara Templin said she won’t pay because she doesn’t think educational supplies should be taxed and because she believes she was over-assessed.

Graphic Design, a downtown company that makes signs and awnings, owes nearly $10,000 dating back to 1995. Owner Dave Quinn received notices, but said he thought they were a mistake, since they were addressed to a business that consolidated with his own.

Gary Jones, owner of Intermountain Fabricators, said he’s working his way out of debt and probably will pay his $9,846 tax bill this year.

“I don’t have a problem with paying taxes. It’s scriptural,” said an apologetic Jones.

County records show that Applewood Farms in Greenbluff should have paid personal property taxes every year since 1989, and now owes $29,500. But Ron Andrews, a former partner in the business, said it folded in the early 1990s.

“There’s no business. There’s nothing there,” he said.

If it’s personal, it’s not taxed Part of the problem, tax collectors acknowledge, is that the personal property tax is confusing. Despite the name, it is levied only on business equipment, not household items.

Real estate is exempt, as are cars and trucks that fall under the state’s vehicle excise tax. Tractors and other farm equipment are not exempt.

Business products and retail goods are exempt; fabric, lumber and other raw materials used by manufacturers are not.

Amway distributorships and other in-home businesses often qualify for an exemption given to companies with less than $3,000 worth of equipment and no employees.

The tax is assessed at the same rate as taxes on real estate, so the cost varies from neighborhood to neighborhood.

A business in downtown Spokane with $10,000 worth of equipment pays about $150, with about $49 going to Spokane schools, $44 to the city, $38 to the state school fund and $17 to the county.

The same business would pay $165 in the Central Valley School District, including money for the schools, state and county, plus the county road fund, library district and fire district.

How it’s assessed

When a new business opens in Spokane County, it’s required to send a list of its equipment, and the value of each piece, to the assessor.

If the business complies, the county accepts the statement, no questions asked, said Sharon Stern of the assessor’s office. Taxes are assessed accordingly.

If the business doesn’t respond, the county guesses what it owns, based on what similar businesses have reported. If the estimate is wrong, the business has 30 days to protest.

“The obligation is on the taxpayer to say, ‘I don’t have this,”’ Stern said.

King and Snohomish counties are not quite as trusting. Both have auditors to verify businesses’ claims and visit those that don’t report.

“With any self-reporting assessment, in order to have compliance, it helps to have auditors,” said Michelle Hagen of the King County assessor’s office.

The state Department of Revenue recommended in 1996 that Spokane County hire an auditor. It was among many recommendations for improving the troubled department.

Since then, commissioners have given Assessor Charlene Cooney money to hire six workers, along with new equipment suggested by the state.

The assessor, who was unavailable for comment Friday, hopes to hire an auditor next year, said Stern.

It will be too late to help Spokane businessman Steven Croonquist.

‘I won’t pay’

Croonquist, who owns a restaurant and bakery supply business, said he doesn’t remember getting a notice asking for a list of assets. Nor did he respond when the county sent its estimates, followed by tax bills for $1,200 a year.

“I run a fairly large business and … put in something like 100 hours a week,” he said, when asked how the bills could have gone unnoticed for four years.

The county overestimated the value of Croonquist’s equipment so much that the Board of Equalization, which hears tax appeals, lowered his annual payment to just $41.

But the board could legally go back only three years. Croonquist still owes $1,258, plus $906 interest, for the 1992 tax year.

McGarry said Croonquist can file a complaint with the assessor, who could request that county commissioners erase the bill. Croonquist said the first time he heard that advice was from a reporter on Thursday.

Thinking he was out of options, Croonquist packed up some of his equipment and has been expecting the county to show up with a moving truck.

“The county said, we’ll come with the sheriff and we’ll pick it up if you don’t pay your tax,” he said. “Well, I won’t pay it.”

Improving collections

For five years after county commissioners met a tight budget by cutting positions, the treasurer’s office had no one to contact businesses that were past-due, said Wolverton.

“We had one gal who handled personal property when she could,” the treasurer said.

Wolverton said she asked commissioners for money to hire a full-time collector in 1994, but was turned down. She got the money last year and hired McGarry, who Wolverton says more than earns his wages.

Thumbing through stacks of tax bills that are long overdue, McGarry said he works on them when he can. He’ll get money from some, he said, but isn’t optimistic about others.

“A lot of them are businesses that are gone,” he said. “I don’t know how I’m going to collect them.”

McGarry said it’s more productive to contact businesses that miss just one payment, usually because they overlooked the bill. A telephone call normally is all it takes to clear up such cases.

“Most people want to do the right thing,” he said.

, DataTimes


 
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