Some Jonesboro businesses may be underreporting their annual income, or are operating under another business’ operating license, in moves that violate city laws, officials announced this week.
Jonesboro Mayor Joy Day and City Clerk Janice Truhan informed the town’s city council this week that the city is planning to audit the gross income earned by businesses in the city. They explained there are some large businesses, which they are declining to name publicly, that are reporting gross revenues figures that are lower than the city suspects they truly are.
A business’ gross annual revenues determine how much it pays the city in occupational fees when it goes to renew its business license each year, according to Day.
The city officials also told the council that they discovered a few cases where people are operating multiple businesses under someone else’s business license.
“We are going to send some letters [to questionable businesses],” Day told council members. “But, before we turn over that big, nasty flower pot — and find a bunch of slugs under it — we wanted to let you know about it. There’s going to be some heat probably [from upset business owners].”
The accusations leveled against some of the businesses are serious. If they are true, it could mean the city is earning less revenue from business licenses than it should be bringing in.
“It’s just gotten worse, and it’s become so blatant that we need to get some direction from the council on what to do,” Day said.
One unnamed, “fairly prominent” business in the city reported it only earned $22,000 in gross revenues last year, according to city officials. The city has also discovered the owner of the business has also been operating some side businesses in Jonesboro without registering them with the city, according to Truhan.
“So, there was not only the gross receipts this year that are misstated, but also failure to report gross receipts, and obtain licenses for [other] businesses in the city,” Truhan said.
Day said a significantly smaller business in the city, meanwhile, reported that it earned $108,000 in gross revenues in 2011.
The case involving the business that only claimed $22,000 in gross receipts illuminates another problem that city hall officials said needs to be cleared up: Multiple businesses operating under someone else’s business license.
“Some individuals have as many as five businesses operating under another business license, from the prior owner,” Day said. She explained the city discovered this through searches of business registrations on the Georgia Secretary of State’s web site.
City officials said they also discovered some used car sales businesses are operating without the state professional certification that they are required to have to be in business. That is a violation that would require state officials to investigate, according to Truhan.
Day later told a reporter that she and other city hall officials have not yet determined how many businesses are committing either city code violation. She said the audits are expected to determine that number. Her hope, however, is that it is only a small number of businesses in Jonesboro that are committing the violations.
“I don’t think it’s widespread,” she said. “I think it’s a minority of the businesses in the city that are operating this way.”
She added that it would be unfair if a large business is underreporting its annual income, while a small business is accurately reporting its income. She explained that one small business in the city reported earning $108,000 in gross income in 2011. That means the small business paid more in business license fees this year, than the prominent business that reported only $22,000 in gross revenues.
“It’s unfair for smaller business to be paying more, just because a larger business is not reporting its true revenues,” Day said.
The mayor said the audits are allowed under city code, and likely will be conducted in categories. That way all businesses that are listed as beauty shops or convenience stores, for example, will be audited together.
“According to code, we have the right to go out and access customer records if we believe them to be fraudulent statements,” Truhan said. “What we do is alert them that they are being audited. They are then obligated to bring in their statements, bank statements, tax returns, or anything that they want to originally produce themselves ...
“We’ll do an analysis of that, and come up with an average monthly [income] and see if what’s reported matches correctly.”
One suggestion to fix the problem could be changing the way the city determines how much money a business must pay for its business license, according to Council Member Clarence Mann. “Maybe we could do what other cities do with the issuance of business licenses, and do it on a tiered basis ... according to how many employees a person has,” he said.
The accusations left council members asking several questions about what the next steps will be for the city in verifying the reported incomes.
“Does city hall take care of this, or do we have to hire an auditor?” Council member Bobby Wiggins asked. Day said it would be handled by city hall staff.
“The refusal to produce documents [during the audit], does that allow us the right to revoke the occupational [business] license?” Council member Pat Sebo then asked. Truhan said it does. She added that she can have citations issued to business owners, and brought before Jonesboro’s municipal court judge, for refusal to cooperate with the city on the audit.
Council member Wallace Norrington said he would like to see the city put in some steps before a business owner is taken to court over the audit, however.
“I would like to send a warning to them,” he said.