Restaurants, hair salons, a defunct dollar theater, even Little League baseball teams. These businesses are among nearly 1,200 in Allen County that owe the state of Indiana unpaid sales taxes totaling $6 million.

The Indiana Department of Revenue is listing tax-delinquent businesses in an online database in compliance with a new state law. The businesses listed have expired registered retail merchant certificates because they didn’t pay delinquent sales tax debts – meaning they’re operating illegally.

The new law requires the agency to post the names, addresses and county locations of more than 26,000 businesses with merchant certificates that have expired because of tax debts. The database launched Jan. 1.

By midday Tuesday, the online site had collected more than 300,000 visits, accounting for about two-thirds of traffic to the state’s Web site at that time, Indiana Department of Revenue spokeswoman Stephanie McFarland said.

About 25 businesses that learned – either through media coverage or their own searches – that they were in the database already have contacted the agency in hopes of resolving the issue, she said.

The public database is part of an effort to increase the collection of sales taxes. To a cash-challenged state, the $100 million owed by the businesses in the database would make a difference.

Creation of the database was part of the massive budget bill passed in a special legislative session last summer.

McFarland said the amounts owed range from a few hundred dollars to seven figures, some from as far back as 1968.

But it’s impossible to know from looking at the database which businesses are the biggest transgressors because the Department of Revenue by law is prohibited from publicly releasing amounts owed by individual taxpayers.

Indiana’s 7 percent sales tax is considered a “trust tax,” meaning businesses collect it directly from consumers and are expected to pass it on to the state.

“This money doesn’t come from the businesses’ pockets, and it’s not supposed to be used to fund their operations,” Revenue Commissioner John Eckart said in announcing the database. “They are to hold it in escrow, essentially, until it’s due to be paid to the state.”
Who is on the list?

What is apparent in looking at the new database is that some business names stand out for how often they’re listed.

One of them is Rent-a-Center Inc., based in Plano, Texas, which offers furniture, appliances, electronics and computers. Statewide, the rent-to-own company has 47 listings, including three in Allen County.

Rent-a-Center spokesman Xavier Dominicis said the company has some ongoing tax disputes with the state and is in the process of seeking removal from the database. He added that Rent-a-Center files close to 9,000 tax returns in thousands of jurisdictions.

“It’s not like it’s a ‘deadbeat’ issue,” Dominicis said. “There’s an issue where there’s a disagreement.”

If Rent-a-Center’s inclusion is legitimate, as the Department of Revenue says it is, the company isn’t the only one with multiple locations listed in the database.

Fiesta Salons Inc. has more than 90 locations in the state, including 11 in northeast Indiana, where sales taxes are owed, according to the state. A representative from the salon chain could not be reached for comment.

The list also includes many small and apparently home-based businesses, and even several Little League teams, such as the now-defunct Holy Cross Little League of Fort Wayne. A representative of the team could not be reached.
Other reasons

All retail businesses in Indiana must have a valid registered retail merchant certificate on file with the Department of Revenue. Operating without one can subject business owners to a Class B misdemeanor, punishable by a fine and/or jail time, the agency said.

Businesses can land on the database for reasons other than delinquent sales taxes; they might have closed and neglected to inform the agency.

That might explain the inclusion of a dollar theater at 6414 E. State Blvd. that closed about a year ago.

In those cases, the business owner just needs to provide proper documentation in order to be removed from the list, according to the Department of Revenue.

It’s not the first time the department has posted the names of tax scofflaws online. In 2004, another database listed taxpayers with tax warrants worth more than $1,000 that had been outstanding at least two years.

The law that created that database allowed it to be posted only until June 2006, the agency said.

The Journal Gazette
1/10/2010
By Angela Mapes Turner