Cape begins checking business tax receipts

Cape Girardeau officials will begin a random check of businesses to make sure they are properly collecting the city's motel and restaurant taxes.

The city council on Monday voted to hire the local accounting firm Beussink, Hey, Roe, Seabaugh and Stroder LLC to perform the random checks.

City officials said the move will meet a provision of an agreement made with motel and restaurant owner Jim Drury in 2003. The agreement settled Drury's lawsuit against Cape Girardeau over the city's $8.9 million share of funding for the River Campus arts school development.

As part of the agreement, the city agreed to conduct random checks to make sure businesses are properly collecting the city's motel and restaurant gross receipt taxes -- a 4 percent tax paid by motel customers and a 1 percent tax paid by restaurant customers.

City officials said the scrutiny makes sense. "It is just good business to do this," said city manager Doug Leslie.

Mayor Jay Knudtson said city officials considered trying to do the checks with city staff but concluded it would be less expensive to hire a local accounting firm. In addition, he said the approach provides an objective third-party analysis.

"It is just an increased form of accountability," he said.

The record-checking work and the subsequent reports submitted to city government will cost $35 to $150 an hour depending on the task.

Leslie estimated the city may spend about $5,000 annually in motel and restaurant tax money on the tax-compliance examinations.

Officials intend to try the examinations for a year. City finance director John Richbourg said the city can cancel the contract with the accounting firm at any time.

The restaurant tax currently is collected from 151 Cape Girardeau businesses, including restaurants as well as supermarkets and convenience stores that sell prepared food. The motel tax is levied at 13 lodging establishments, city officials said.

Cape Girardeau received nearly $1.3 million from the restaurant and motel taxes in the past fiscal year that ended June 30, Richbourg said.

As part of the scrutiny, the accounting firm will randomly check the financial records of eight businesses a year -- two each quarter.

City officials stressed that the financial examinations don't constitute official audits.

Each selected business will be notified in writing, and the accounting firm will contact those businesses by telephone to arrange for a convenient time to examine their financial records, Richbourg said.

The random checks probably will begin in February or March, he said. The accountants will look at the financial records of a company for the previous quarter. Initially, that would be for the period of October through December of last year, he said.

If problems are found, the review could be expanded to cover additional months, Richbourg said.

Knudtson doesn't think businesses are trying to cheat the city out of tax money. But he said the checks will provide some assurance that businesses are collecting the tax as required by city law.

Drury in the past complained that some businesses serving prepared food weren't collecting the tax.

"Part of his concern was to ensure that all people who should be paying the tax were paying it," the mayor said.

"I had no problem including that in the agreement," said Knudtson, who helped engineer the out-of-court settlement that cleared the way for using motel and restaurant tax money to help fund Southeast Missouri State University's River Campus project.

Voters initially approved the motel and restaurant taxes in 1983 to help retire Show Me Center bonds and fund the operation of the convention and visitors bureau. Five years later -- sparked by the concerns of Drury and others -- voters expanded the restaurant tax to include convenience stores, supermarkets and concession areas of large retail stores that serve prepared food.

mbliss@semissourian.com

335-6611, extension 123