HomeMy WebLinkAbout04 - Review of Aerospace DecisionMeeting Date: February 27, 2001
Agenda Item No
CITY OF NEWPORT BEACH
Administrative Services Department
Resource Management • Fiscal Services • M.I.S. • Revenue • Accounting
TO: Mayor and City Council Members
FROM: Glen Everroad, Revenue Manager
SUBJECT: Authorization of Municipal Revenue Advisors to Review State Board of
Equalization Documents Regarding the Aerospace Decision
SUGGESTED ACTION: Approve the attached proposed Resolution allowing staff of Municipal Revenue Advisors
to review State Board of Equalization confidential materials.
Background
In 1993, the U.S. Supreme Court der, mrined that federal government aerospace contractors should not have paid
sales tax on purchases from vendors for parts and materials incorporated into their production of products for the
federal government. As a result of this decision the California Board of Equalization (BoE) implemented in 1994 a
methodology to debit from California cities those sales tax revenues attributable to the above purchases. The total
amount of sales tax that Newport Beach was debited since 1994 is over $450,000.
Determination of which cities were to be debited, and by how much, was based on claims filed by aerospace
contractors and BoE calculation. This methodology assumed that all company facilities that the BOE labeled as
"aerospace" were subject to this debit. In the case of Newport Beach, we believe that all of the activities of the
Rockwell facility (now Conexant) in Newport Beach were classified by the BOE as aerospace in nature.
Information provided by Conexant tax management staff indicates that a significant portion, or possibly all, of its
operations were in fact dedicated to non - governmental and non - aerospace products. If accurate, then the BOE
debits to the City for Rockwell were in error.
Revenue and Taxation Code section 7056 restricts access to information contained in or derived from sales or use
tax records. This section requires the City Council adopt a resolution authorizing specified City staff and
consultants to the City to review confidential sales and use tax records related to the City.
The City currently contracts with Municipal Revenue Advisors (MRA) to conduct sales & use tax audits. The BoE
has recently agreed to permit our review of the BoE working papers of the Rockwell claim for reimbursement and
the related reimbursement methodology. In order for MRA to conduct the review and determine whether the City
was il&N d-in excess on the Rockwell claim, the attached proposed Resolution must be adopted.
Glen Everroad, Revenue Manager
attachment: Proposed Resolution
RESOLUTION NO 2001-
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF NEWPORT BEACH DESIGNATING
MUNICIPAL REVENUE ADVISORS AS AN
AUTHORIZED CITY REPRESENTATIVE TO
EXAMINE SALES AND USE TAX RECORDS
WHEREAS, pursuant to California Revenue and Taxation Code Section 7200 et seq., the
City of Newport Beach has adopted a sales and use tar ordinance that imposes a tax and provides
a measure that can be administered and collected by the State Board of Equalization along the
same and existing statutory and administrative procedures followed by the State Board of
Equalization in administering and collecting the California State Sales and Use Taxes.
WHEREAS, pursuant to California Revenue and Taxation Code Section 7056, the City of
Newport Beach, by resolution, may designate any officer, employee or any other person to
examine all of the sales and use tax records of the Board pertaining to sales and use taxes
collected for the City.
WHEREAS, the City of Newport Beach has entered into an agreement for sales and use
tar auditing with the firm Municipal Revenue Advisors, which requires that the consultant
examine sales and use tax records.
WHEREAS, all legal prerequisites prior to the adoption of this Resolution have occurred.
NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Newport
Beach as follows:
Section 1: The City Council of the City of Newport Beach hereby certifies that
Municipal Revenue Advisors (hereinafter referred to as "CONSULTANT ") meets all of the
requirements of California Revenue and Taxation Code Section 7200 et seq., as more
specifically described in Sections 2 and 3, below.
Section 2: The City Council of the City of Newport Beach hereby certifies to the
State Board of Equalization that CONSULTANT is a designated representative of the
City of Newport Beach to examine sales and use tax records of the Board pertaining to
sales and use taxes collected by the Board on behalf of the City of Newport Beach.
Section 3: Pursuant to California Revenue and Taxation Section 7056(b), the City
Council of the City of Newport Beach hereby certifies that CONSULTANT meets all of
the following conditions:
a. CONSULTANT has an existing contract with the CITY to perform sales and
use tax audit services;
b. CONSULTANT is required by that contract to disclose information contained
in, or derived from, sales tax records only to an officer or employee of the CITY who is
authorized by resolution to examine the information;
c. CONSULTANT is prohibited by the contract from performing consulting
services for a retailer during the term of the contract; and
d. CONSULTANT is prohibited by the contract from retaining the information
contained in, or derived from, those sales tax records after the contract expires.
Section 4: The City Clerk shall certify to the adoption of this Resolution.
Adopted this day of 2001.
Mayor
ATTEST:
City Clerk