SAN JUAN CAPISTRANO : City to Probe Drop in Sales Tax Revenue

Concerned about lagging sales tax revenue, the city has hired a firm to recapture funds that may have been inadvertently lost through retailers’ errors.

Errors could arise from a merchant failing to report a change of address when moving a business to San Juan Capistrano, using a home address elsewhere when registering for a state Use Tax Permit or expanding a business but attributing all sales taxes to a location in another city.

The City Council approved spending $3,150 to hire the sales tax consulting firm last week.

The firm will receive 15% of all the misreported sales tax revenue that it helps recapture.

Under a best-case scenario, the city could recover as much as $120,000 annually in wrongly allocated revenue.

The city’s sales tax revenue dropped about $300,000 in the latest fiscal year ending June 30, according to city officials.

For the fiscal year ending June 30, 1993, the city had $3 million in sales tax revenue. In the most recent fiscal year, the amount fell to $2.7 million.

The drop is tied mainly to San Juan Capistrano residents shopping in nearby Mission Viejo and Laguna Niguel, where large stores have recently opened, said Douglas Dumhart, a city management assistant.

Dumhart said those cities showed slight gains in sales tax revenue for the first quarter of 1994.