By Josh Bergeron

The Selma Times-Journal

Businesses, delinquent in paying sales tax, are putting Selma in a bind.

But those businesses may have a difficult time continuing to evade the city’s tax collection service.

The Alabama Department of Revenue will begin collecting Selma’s sales tax on Nov. 1 after the city council voted Tuesday to drop Revenue Discovery Systems.

Council President Corey Bowie said one reason for the switch is a sales tax shortage.

As of Aug. 31, the city had collected approximately $9 million in sales tax — nearly $300,000 less than the city collected last year.

The root of the problem may be that businesses aren’t accurate reporting sales numbers, Councilman Cecil Williamson said.

City financial documents show the city is owed nearly $500,000 in sales tax from local businesses.

Williamson said hotels, convenience stores and tobacco stores are the main culprits behind the decline.

“We just have a number of people that are not paying or reporting their taxes,” Williamson said.  “The lodging tax is down and cigarette tax is down. I think the problem is widespread among hotels, convenience stores and tobacco stores.”

Council president Corey Bowie said the shortage in sales tax was a primary reason behind the switch in collection agencies.

“I think that the Alabama Department of Revenue has a little more teeth to collect the tax owed to the city because they are the state,” Bowie said.

The Department of Revenue will charge more than RDS, but the benefits are worth the added cost, Bowie said.

Currently, RDS charges the city $1.85 cents for every $100 collected in sales tax. The Department of Revenue will charge a maximum of 2 percent of all sales tax.

Nearly all tax collections services are included in the 2 percent, including filing of returns, auditing services and electronic sales tax collection, local government liaison John Paradise said.

“The difference will be greater coverage in conjunction with making sure taxpayers are in compliance,” Paradise said. “We prefer to rehabilitate taxpayers, but we do have forced collection methods.”

The Department of Revenue’s tax collection services work on a sliding scale, which means the city’s cost for tax collection may steadily decline.

“The way I understand it, the more money they collect the lower the percentage is,” Williamson said.

Though the city is working to collect delinquent taxes, the sales tax shortage has taken a toll on city finances.

The city council will discuss its fiscal year 2013-2014 budget, projected to be at least $300,000 less than the fiscal year 2012-2013 budget, at its Sept. 19 meeting.

Williamson said the cuts would have a minimal effect on city services, such as the police department and fire department.

Instead, the city will choose not to fill currently vacant positions.