In Search Of Taxes That Go Astray

Va. Counties Chase Missing Money

When a routine audit found that a major Fairfax County retailer was inadvertently sending the county's 1 percent share of sales tax revenue to the City of Alexandria, county officials knew they were in no position to let the error slide.

Fairfax officials were told yesterday that the misrouted taxes from the busy Target store will yield $1 million in found money at a time when a looming $650 million shortfall means that every extra penny counts.

"We can't afford to let money go astray, especially not in this budget situation," Supervisor Linda Q. Smyth (D-Providence) said yesterday.

Across Northern Virginia, local governments are carefully poring over their tax collections to make sure they are getting every cent they are due. After Fairfax discovered the error, Alexandria officials sent a tax specialist to root out other misdirected taxes and found several cases in which money was mistakenly going to Arlington County or Fairfax.

In Loudoun County, residents this month opened their personal property tax mailings to find fliers that said "Do You Know a Dodger?" -- referring to businesses that are not paying the proper taxes to the county. Another flier, meant to remind people to check their utility bills to make sure that the local tax is going to the right jurisdiction, said, "Is Your Utility Tax Going to Lunenburg?" -- that is, a county in southern Virginia.

"We're just trying to get the citizens' help in getting this corrected," said Robert S. Wertz Jr., Loudoun's revenue commissioner. "We want to let people know that the county could be losing money because of a clerical error."

At the state level, Gov. Timothy M. Kaine (D) hired 55 workers in Virginia's state tax department to help recoup about $1.4 billion in unpaid taxes. Similar efforts are underway in Maryland, where state officials recently discovered that they had accidentally shorted Montgomery County about $31 million because of an error in the school funding calculation.

Montgomery officials said they have confidence in their tax collection process and are not undertaking any extra efforts.

Fairfax made its discovery about Target as part of a broad review that began early last year, after Henrico County estimated that it had lost about $5 million a year because of mistakes with sales taxes.

In Fairfax, officials discovered that dozens of companies were making errors on their tax forms, sometimes sending their sales tax collections to Prince William County or Fauquier County. In other cases, businesses outside the county were wrongly paying Fairfax. As of Dec. 17, Fairfax had made a net gain of $4.1 million through its audits, according to a report delivered to the Board of Supervisors yesterday.

Target has been paying the correct amount of money to the state, but because of a mistake in its tax forms, the state was allocating the money to Alexandria. The state's tax department will reimburse Fairfax over the next six months by trimming what Alexandria receives and giving extra to Fairfax.

"We have paid the right amount of taxes. However, we were recently made aware of a misallocation of some of these taxes related to one of our stores and have been working with Virginia to make sure those funds are reallocated correctly," said Hadley Barrows, a Target spokeswoman.

Supervisors speculated that the problem resulted from confusion about where the business was located. The Target, on Richmond Highway, is just outside the City of Alexandria and has an Alexandria mailing address.

Indeed, figuring out what jurisdiction a business is in can be a dicey proposition. For example, a Chuck E. Cheese on Main Street sits right on the border of Fairfax City and Fairfax County. A spokeswoman for the restaurant chain said it received a letter from the county recently asking it to split its sales tax receipts between both jurisdictions. The restaurant gladly obliged.