As the Indiana Dept. of Revenue and Zionsville and Whitestown officials continue to untangle a way for diners to receive refunds for taxes that shouldn’t have been charged, some taxpayers are wondering if it will be worth the effort.
DOR reported in October that Zionsville received nearly $300,000 in food and beverage taxes collected at several Whitestown restaurants since 2008. Because Whitestown doesn’t have a food and beverage tax, diners at affected restaurants paid 1 percent that they never should have been charged.
DOR sent cease-and-desist letters to all of the affected restaurants and as of Nov. 1 had received written confirmation from all but two – El Rodeo and Thai Select – that the tax no longer is being charged.
“They were able to verbally communicate to DOR their plans to implement the cease-and-desist,” said Emily Landis, DOR director of external communications. “Both organizations are working through internal issues in order to address DOR’s request.”
When reached by phone, an employee at Thai Select said the restaurant had resolved the problem, and a manager at El Rodeo was not immediately available for comment.
DOR is working on a plan to allow taxpayers to receive refunds by completing a form and providing a receipt or bank statement. Those affected will have at least 90 days to show proof of purchase, although a specific time period has not yet been set.
Lifelong Zionsville resident Gina Snodgrass said she dines once or twice a month at restaurants that had been charging the tax. She said she didn’t keep any of her receipts and isn’t likely to search through bank statements to identify the charges.
“Providing proof of purchase seems like an absolute nightmare for any and all involved,” Snodgrass said. “I do not believe I would go through the hassle. It would be too insignificant of an amount.”
Landis said DOR has no way of accurately estimating how much money will be refunded. But she said the Town of Zionsville has committed to paying back the amount requested in taxpayer refunds.
“The difference from the refund amount and what was already appropriated to Zionsville as a result of collecting this tax is part of ‘phase two,’ requiring DOR to work with both community leaders to come to an agreement that is not detrimental to either party involved,” Landis said.
Whitestown Town Manager Dax Norton said that during his most recent meeting with DOR a plan was discussed to divert any leftover funds to the state’s general fund. He expects that a good bit of the tax money won’t be refunded, in part because many of the taxpayers live in other states.
“It’s going to be very difficult to find all of the taxpayers,” he said. “Is there an easy way to do this? No.”
Zionsville isn’t the only municipality that’s received food-and-beverage taxes it shouldn’t have. In other cases, however, the taxes were sent to the wrong city and the problem was corrected by transferring the funds to the correct one.
But this time, with thousands of taxpayers affected and many likely to never get their money back, the problem has led the Indiana Dept. of Revenue to conduct a review of the food-and-beverage tax collection system.
“We are in the process of finalizing a geo-coding program that would resolve this exact issue for all new and existing businesses,” Landis said. “We plan to roll out those plans in the very near future.”