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HomeMy WebLinkAboutITEM V-C-1CITY OF CITY WASHINGTON AGENDA BILL APPROVAL FORM Agenda Subject: Microflex Tax and License Audit Agreement Date: July 21, 2008 Department: Finance Attachments: Tax and License Audit Budget Impact: Agreement Administrative Recommendation: City Council to grant permission to enter into an Agreement with Microflex, Inc. to perform utility tax collections audit services. Background Summary: Finance recommends that we enter into an agreement with Microflex, Inc. to audit utility tax collections from the private providers to ensure recent annexations and increases in this revenue stream have been captured and implemented by these providers. N0804-1 A3.16.3 Reviewed by Council & Committees: Reviewed by Departments & Divisions: ? Arts Commission COUNCIL COMMITTEES: ? Building ? M&O ? Airport ® Finance ? Cemetery ? Mayor ? Hearing Examiner ? Municipal Serv. ? Finance ? Parks ? Human Services ? Planning & CD ? Fire ? Planning ? Park Board ?Public Works ? Legal ? Police ? Planning Comm. ? Other ? Public Works ? Human Resources ? Information Services Action: Committee Approval: ?Yes ?No Council Approval: ?Yes ?No Call for Public Hearing Referred to Until _/_/_ Tabled Until _/-/_ Councilmember: Backus 71 Staff: Coleman Meeting Date: August 4, 2008 item Number: V.C.1 AUBURN* MORE THAN YOU IMAGINED TAX AND LICENSE AUDIT AGREEMENT THIS AGREEMENT is made by and between Microflex, Inc. a Washington State corporation (hereinafter "Microflex") and The City of Auburn (hereinafter "Client") the parties hereto. In consideration of the covenants contained herein, the parties AGREE as follows: Section 1: Scope of Work. Microflex will provide a tax and discovery program in an attempt to recover additional tax and license revenue for Client. These services will include the following items. (a) Utility Taxes and Franchise Fees: At the Client's request, Microflex will look for new utility tax accounts in the following ways: (1) Microflex will make sure the telephone utilities found when auditing sales tax are reporting utility tax if applicable. Telephone utilities found not to be reporting will be provided with the Client's ordinance and remittance forms and Microflex will follow up until they begin reporting. Microflex will pursue back taxes as appropriate. (2) Microflex will perform compliance audits on all other utility company billing transactions to insure they correctly include customers which live within the Client's jurisdiction when they compute their utility tax and/or franchise fee payments. (b) Microflex duties herein will be performed primarily using computer technology, and will be in large part dependent on cooperation of the Client, including the Client supplying the necessary data and resources requested by Microflex. (c) Microflex will perform the following aspects of audits: (1) Using computer technology to identify potential missing taxes. (2) Act as an agent of the Client in contacting the appropriate business or state agency to determine if taxes are due. (3) Follow-up with the Department of Revenue or directly with the business on audits where taxes or fees are due. If Microflex is unable to cause voluntary compliance, it will notify the Client, which then may initiate legal action. Nothing herein requires Microflex to take formal collection action or litigation to collect back-taxes or other amounts which may be owing to Client. (4) Provide monthly reports showing the status of the audit. Section 2: Data to be supplied by Client. Client will provide Microflex within 20 days of request the following data in a computer readable format: (a) Copies of the Client's last utility tax returns or a listing of names and addresses of all private utilities which are paying the Client's utility tax. Section 3: Client Responsibilities: The Client will provide Microflex with the following: (a) Data described in Section 2 hereof. (b) Copies of appropriate ordinances governing applicable taxes. Microflex may also obtain this information from Client's website or other resources if available. TAX AND LICENSE AUDIT AGREEMENT Page I (c) An accurate map, to scale, detailing and large enough to identify and clearly show the Client's boundaries and jurisdiction (e.g., City limits). (d) Any other information reasonably required from Client for Microflex to perform its duties. Section 4: Audit Fees. Microflex will be compensated on a percentage of revenue recovered basis as follows: (a) Missing or adjusted returns for existing utility tax accounts and franchise fees -- 22% of the actual amount of tax recovered. These are usually discovered through a utility compliance audit. (b) New utility tax accounts and franchise fees discovered - 22% of all back taxes or fees collected and 22% of new taxes or fees accrued for a period of one year after the account is identified and begins normal reporting. This means 12 returns for monthly reporters, 4 returns for quarterly reporters or one return for annual reporters. For example, if the first normal quarterly return for an account discovered by Microflex includes only one month of taxes, then New Revenue includes one month of the first quarter, the next three quarters, and two months of the fifth quarter. A new account is defined as one which has never reported to the Client. Section 5: Reimbursable Expenses. Not applicable. Section 6: Payment Terms. Invoices are generally submitted monthly to the Client and are due within 20 days after receipt. Audit Fees are due upon the Client receiving the new revenue discovered by Microflex. Past due amounts shall accrue interest at the rate of 1.5% per month. Section 7: Audit Termination. The audit services can be terminated with 30 days advance written notice by either party. For new sales tax accounts and new utility tax accounts described in Section 4(b) whose one year period extends beyond the termination of the audit, the Client agrees to continue to identify revenue receipts and pay Microflex fees until the one year period expires. Client shall provide to Microflex such necessary information and data to verify Client's compliance regarding fees to be paid to Microflex after termination of its audit services. Section 8: Confidentiality. In the course of fulfilling its responsibilities under this proposal, Microflex may have access to confidential taxpayer information from various sources. Microflex agrees not to disclose such information in any form to any party without the prior written consent of the Client, or as may otherwise be required by legal process. Notwithstanding the above provision, Client authorizes Microflex to distribute gross amounts collected on behalf of Client, and Client referral contacts, for marketing and promotional purposes of Microflex. Section 9: Indemnification. Microflex will indemnify and hold harmless the Client, its officers, agents and employees from and against any and all liabilities, costs, damages, lawsuits, including the cost of all reasonable attorney fees, to the extent of its negligent performance of Microflex's responsibilities, but subject to the limitation of liability provisions elsewhere in this Agreement. Section 10: No Guarantees/Limitation of Liability. Microflex will put forth its best efforts to identify as much missing, unreported or under-reported tax and license revenue as possible, which will depend on the Client's cooperation among Client's other duties herein. However, Microflex does not guarantee that it will identify or recover 100% or any other percentage of missing or uncollected tax, license or other revenue. In no event will Microflex be liable for its failure to identify or collect missing or wrongfully reported taxes and license fees. Notwithstanding anything herein to the contrary, Microflex's maximum liability under this Agreement for breach of contract or any other legal theory alleged against it is the return of Audit Fees paid to it by Client, or the sum of $10,000, whichever is less. TAX AND LICENSE AUDIT AGREEMENT Page 2 Section 11: Computer Software. Client agrees to execute Microflex's applicable software licensing and/or other agreements should Microflex install its software on Client's computers. Section 12: Notices. Notices may be addressed to the parties' representatives executing this Agreement. A party may change its representative (s), or its address by written notice to the other party. Notices may be hand delivered, or mailed with pre-paid postage, or faxed or emailed if there is proof of receipt. Section 13: Law and Venue. This Agreement shall be governed by the laws of the State where the Client is located, and venue of any matter arising out of this Agreement shall be maintained in the County where the Client is located. Section 14: Attorney Fees. Should legal action be necessary to enforce or interpret this Agreement, the prevailing party shall be entitled to its reasonable fees, costs and expenses, including expert witness fees. Section 15: Severability. If any portion of this Agreement is invalid, the remaining portions shall remain in full force and effect. Section 16: Execution of Agreement. This Agreement may be executed and transmitted via facsimile or other electronic means. This Agreement will become binding on the date of last execution hereon. This Agreement may be executed in counter-parts, when both read together the Agreement shall constitute one and the same agreement. The person signing this Agreement represents that he or she has full and proper authority to do so and to bind the party which they are representing. Section 17: No construing Against Drafter. This Agreement in its finalized form is the result of the combined efforts of the parties, and any rule of construction that ambiguities are to be construed against the drafting party, shall not apply. Section 18: Complete Agreement. This document contains the full Agreement between the parties, and supercedes all prior representations and promises with respect to the subject matter of this Agreement. This Agreement may only be changed by a signed writing by the parties. Microflex, Inc. 2201 SW 152nd Street Seattle, Washington 98166 DATE: By: John Smutny City of Auburn 25 W Main St Auburn WA 98001 DATE: By: Name: Title: TAX AND LICENSE AUDIT AGREEMENT Page 3