Item 12AGENDA ITEM NO. 12
AGENDA STAFF REPORT
City of West Covina I Office of the City Manager
DATE: April 5, 2022
TO: Mayor and City Council
FROM: David Carmany
City Manager
SUBJECT: CONSIDERATION OF RESOLUTION NO.2022-26 - AUTHORIZING EXAMINATION OF
SALES AND USE TAX RECORDS
RECOMMENDATION:
It is recommended that the City Council adopt the following resolution:
RESOLUTION NO. 2022-26 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST
COVINA, CALIFORNIA, AUTHORIZING EXAMINATION OF SALES AND USE TAX RECORD
BACKGROUND:
The City has contracted with Hinderliter de Llamas & Associates (HdL) since 1986 to provide ongoing
sales tax data analysis and staff expertise to support fiscal planning and economic development. HdL
has identified and recovered sales and use tax allocation errors and reported deficiencies and prepared
necessary case submittals to the California Department of Tax and Fee Administration.
Using confidential taxpayer records as authorized by Revenue and Taxation Code Section 7056, HdL
identifies and corrects errors that result in underpayments of tax to the City of West Covina. The firm
employs a series of analyses, comparisons with other data sources and physical field canvassing to find,
document and submit for correction all taxpayer errors that result in lost City revenue or could result in
lost revenue in the future.
In March 2022, the City authorized an agreement with HdL Companies to provide Sales and Use Tax
Audit Services.
DISCUSSION:
The City's current resolution authorizing the examination of Sales and Use Tax records is from 2003. The
California Department of Tax and Fee Administration has since updated its template for such resolutions
and HdL recommends the City update its resolution to ensure compliance with the Department. The
appointed representatives are proposed to remain the same and include the City Manager, Finance
Director, City Controller, or other officer or employee of the City designated in writing to the California
Department of Tax and Fee Administration by the City Manager. Additionally, staff proposes expanding
the use of this information to include Budget Planning and Economic Development.
LEGAL REVIEW:
The City Attorney's Office has reviewed the resolution and approved it as to form.
Prepared by: Stephanie Sikkema, Finance Director
Fiscal Impact
FISCAL IMPACT:
There is not a direct fiscal impact associated with this administrative item. However, this resolution
enables the City to continue auditing its sales and use tax to ensure compliance and maintain revenue.
Attachments
Attachment No. 1 - Resolution No. 2022-026
CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability
ATTACHMENT NO.1
RESOLUTION NO.2022-26
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF WEST COVINA, CALIFORNIA, AUTHORIZING
EXAMINATION OF SALES AND USE TAX RECORDS
WHEREAS, pursuant to Ordinance Number 458, the City of West Covina (City) entered
into a contract with the California Department of Tax and Fee Administration (Department) to
perform all functions incident to the administration and collection of sales and use taxes; and
WHEREAS, the City Council of the City of West Covina deems it desirable and necessary
for authorized officers, employees and representatives of the City to examine confidential sales
and use tax records of the Department pertaining to sales and use taxes collected by the Department
for the City pursuant to that contract; and
WHEREAS, Section 7056 of the California Revenue and Taxation Code sets forth certain
requirements and conditions for the disclosure of Department records, and Section 7056.5 of the
California Revenue and Taxation Code establishes criminal penalties for the unlawful disclosure
of information contained in, or derived from, the sales and use tax records of the Department.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CITY OF WEST
COVINA, CALIFORNIA HEREBY RESOLVES AS FOLLOWS:
SECTION 1. The City Manager, Finance Director, City Controller, or other officer or
employee of the City designated in writing by the City Manager to the California Department of
Tax and Fee Administration is hereby appointed to represent the City with authority to examine
sales and use tax records of the Department pertaining to sales and use taxes collected for the City
by the Department pursuant to the contract between the City and the Department.
SECTION 2. The information obtained by examination of Department records shall be
used only for purposes related to the collection of City sales and use taxes by the Department
pursuant to that contract, and for purposes related to the following governmental functions of the
City:
(a) Budget Planning
(b) Economic Development
The information obtained by examination of Department records shall be used only for those
governmental functions of the City listed above.
SECTION 3. Hinderliter, de Llamas & Associates is hereby designated to examine the
sales and use tax records of the Department pertaining to sales and use taxes collected for the City
by the Department. The person or entity designated by this section meets all of the following
conditions, which are also included in the contract between the City and the Hinderliter, de Llamas
& Associates:
(a) has an existing contract with the City to examine those sales and use tax records;
(b) is required by that contract to disclose information contained in, or derived from, those
sales and use tax records only to the officer or employee authorized under Section 1 of
this resolution to examine the information.
(c) is prohibited by that contract from performing consulting services for a retailer during
the term of that contract;
(d) is prohibited by that contract from retaining the information contained in, or derived
from those sales and use tax records, after that contract has expired.
SECTION 4. The information obtained by examination of Department records shall be
used only for purposes related to the collection of City sales and use taxes by the Department
pursuant to the contract between the City and the Department and for those purposes relating to
the governmental functions of the City listed in Section 2 of this resolution.
SECTION 5. This resolution supersedes all prior resolutions of the City Council of the
City of West Covina adopted pursuant to subdivision (b) of Revenue and Taxation Code section
7056.
SECTION 6. The City Clerk shall certify to the adoption of this resolution and shall enter
the same in the book of original resolutions and it shall become effective immediately.
APPROVED AND ADOPTED this 5th day of April, 2022.
APPROVED AS TO FORM
Thomas P. Duarte
City Attorney
Dario Castellanos
Mayor
ATTEST
Lisa Sherrick
Assistant City Clerk
I, LISA SHERRICK, Assistant City Clerk of the City of West Covina, California, do
hereby certify that the foregoing Resolution No. 2022-026 was duly adopted by the City Council
of the City of West Covina, California, at a regular meeting thereof held on the 5th day of April,
2022, by the following vote of the City Council:
AYES:
NOES:
ABSENT:
ABSTAIN:
Lisa Sherrick
Assistant City Clerk