Minnesota Department of Revenue DRAFT

Liquor Posting Payment Plan Amendment 2014

3/28/14

Summary: The PD-A04 amendment dated 3/20/14 05:57PM allows the commissioner to exclude taxpayers from the liquor posting list if: 1) The taxpayer only owes sales tax. 2) There is a written payment plan agreement between commissioner and taxpayer, and 3) Payments under the written plan are made on a timely basis. Effective Date: This provision is effective the day following enactment. Assumptions: 1) $9.0 million per year (CY11-13 average) was collected using liquor posting. 2) Currently the DOR does not allow payment plans on delinquent sales tax. The assumption for this note is that all delinquent taxpayers would want a payment plan. 3) The default rate on payment plans for active business tax is 21%. 4) There were 713 liquor postings during calendar 2013. 5) It would take two hours of staff time to negotiate each payment plan. 6) On average an hour of collecting can raise $400 in revenue. 7) Notifications will need to be mailed to the taxpayer. 8) There would be significant programming changes to assure liquor postings could be managed according to the law change. Calculations: Revenue impact: 21% payment plan default rate multiplied by a full payment plan arrangement of the $9.0 million of collections would result in $1.89 million of lost revenue. If two hours are spend on arranging payment plans on 713 liquor postings, it would take 1,426 hours of time (also see operational impacts below.) If these hours are not spent on collecting at a rate of $400 per hour, the revenue impact is an additional $570,400. TOTAL REVENUE IMPACT: $2,460,400 in lost revenue. Operational impact: The process for collecting sales tax would change dramatically. Processes affected include: 1) Integrated Tax System changes. Depending on the complexity of the process designed to implement, system costs could range from $100,000 to $300,000. 2) Printing and Postage. Depending on the number of payment plans and defaults, printing and postage could range from $25,000 to $50,000. Staff time to negotiate payment plans, process payment vouchers, scan payments, and track payments would be 2,100 hours (1 FTE) at $32.42 per hour would cost $68,086. TOTAL OPERATIONAL COST: a range between $193,083 to 418,086.

Administrative Costs/Savings FY 2014 Salaries and related expenses Systems Development Postage and Paper Totals $ $ $ $ 0 0 0 0 FY 2015 $ $ $ $ FY 2016 (000s) 68 $ 68 100 - 300 $ 0 25 - 50 $ 25 - 50 193 - 418 $ 93 - 118 FY2017 $ 68 $ 0 $ 25 - 50 $ 93 - 118

Number of FTEs Operations and Communications FY 2014 0.0 FY 2015 1.0 FY 2016 1.0 FY2017 1.0