Disgruntled over tax issues

Published 12:00 am Thursday, July 29, 2004

Local business owner says state revenuers are harassing him

By George Wacha

A long-time business owner/operator in Crenshaw County said ever since new technology hit the Alabama Department of Revenue (ADOR), he has been getting harassed, by mail, phone and in person.

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Stephen Penny, owner of Southern Foods Restaurant, located on Main Street in Brantley, has been in the restaurant business for 10 years, including nine years operating the Glenwood Caf\u00E9, and for the last three years, four months, operating in his present location.

"I simply have tried to bring a much-needed service to the citizens of Brantley, and also travelers," Penny said. "I have operated a nice restaurant, in a town where there are not any others."

Penny said he has always paid his business taxes, but began having problems after a new ruling was passed requiring electronic filing of taxes each month.

"They (ADOR) started saying I had to file taxes online, effective Oct. 1, 2003," Penny said. "They said it was pursuant to Alabama Rule 810-1-6-.12.

I don't have a computer. The instructions they sent to me also outlined a toll free number that I could call to file via phone if I didn't have any way to file online, but I don't feel comfortable conducting tax business over the phone."

Penny said he has never missed a monthly payment with the Sales and Use Tax, but began getting multiple mailings each month after the rule was passed.

"ADOR used to send out coupon books that were good for a whole year," Penny said. "And what I would do is compute the tax I owed, and mail a check in with the coupon each month, by the 20th of the month, avoiding the $50 penalty."

Then the coupon books stopped coming in, and Penny began following another procedure that ADOR allowed him to do - using the coupons he still had from the Glenwood Caf\u00E9, but crossing out the name and writing in Southern Foods Restaurant.

"They allowed me to do that, because ultimately, it doesn't matter what your business is called, your account with the tax people is according to your name," he said.

Penny produced cancelled checks for each month he has been in business, proving that he has in fact paid his taxes. The checks go in multiple directions, to satisfy different percentages of the tax each month.

"I pay - just like any other retail business in the state - 4 percent to the state, 3 percent to the county, and 2 percent of gross receipts to the municipality," Penny said. "There are two agencies the tax is mailed to, as although ADOR would distribute the tax revenue to its proper agency for no charge, some local governments, like the Town of Brantley, choose to collect their taxes through a third-party located in Birmingham, called AlaTax."

Penny said AlaTax charges the entity it is collecting for a surcharge of 3 percent of the amount collected.

"The state would collect and disburse it for free, which would save the agencies using AlaTax money that is rightfully theirs, but that is their choice to do," Penny said. "AlaTax allows you to pay monthly taxes either way - via coupon book mailed to you, or online if you prefer."

When asked why he has chosen to continue to pay via mail, Penny said the answer was quite simply economics.

"As I have told the Revenue Compliance officers (RCO) that have come to the restaurant, I am just a small business owner trying desperately to cling to the 'American dream' and did not own a computer, but I have mailed them checks every month, and they have cashed them every month," Penny said. "I have been operating at a loss each month," he said. "Last year I spent more than $187,000 of my personal money keeping this restaurant in operation. I am living by their rules, and paying my taxes - the proof is the fact that each month they cash the checks."

Penny said one RCO in particular was especially harassing when he came to the restaurant.

"A man named Dwight Julian, who works for the State Revenue Department, has been here several times," Penny said. "When he started coming down, he began demanding to see proof of payment for certain months which he had listed. I showed him the cancelled checks for each month in question, but then he wanted to take them with him, and I wasn't going to let him take my only legal proof from me."

Penny said he was as cooperative as he felt he needed to be with the man.

"I told him that I was living by their rules, paying my taxes as required each month, and they were taking them, so there should not be any problem," he said. "That was when he said it was because I was not paying the taxes online, I owed a delinquency amount."

Penny said he did not like the way in which the department is pressuring business owners.

"He (Julian) was acting like the Gestapo, treating me badly, and acting in a very threatening manner to me," Penny said. "This guy works for the state government, paid by me and every other citizen, and yet thinks he can just push people around. It's not right. Every time I go to the mailbox, I expect to find a letter from them saying I'm delinquent, because this is not a new thing anymore."

Penny said he received notice from the state in 2001 to cease paying AlaTax and send the whole amount to the state.

"It was back when the Crenshaw County Commission decided to let the state handle the sales and use taxes each month, saving the local government 3 percent on their expected revenue, an amount that could be used elsewhere in county business," he said.

Penny illustrated how his taxes were being routed, and produced the checks to prove it.

"For example, for the month of April 2004, I paid $35.34 to 'Tax Trust Account,' which is the name on the checks payable to AlaTax - due by May 20th and paide on time - and the check was received and cashed, assumedly posted on my account, on May 26, 2004," Penny said. "I have the checks to show that I have paid all my taxes on time - two checks to ADOR and one to AlaTax."

Penny said the actual point of the problem is simple.

"The point is that I cannot afford to file my taxes their (ADOR) way, so they are mad with me," Penny said. "But they continue to cash my checks, so they are still getting my payments on time."

Penny said there is an obvious difference between this one agency of state government and others he has dealt with, but they should all be glad to work with citizens they represent.

"The Alabama Department of Transportation has been a pleasure to work with, concerning my questions regarding signs," Penny said. "And yet, when I deal with another branch of state government, the Department of Revenue, they are harassing and demanding, trying to scare the business owner into whatever they want done - I am not afraid of them, and encouraged Mr. Julian to take this issue to court - my attorneys will know how to handle it for me."

Penny said it is things like this that are hurting small business.

"Basically, they are the reason small business and small cities which benefit the most from the tax revenue are hurting financially, and why small businesses end up folding," he said. "They are forcing businesses to close, therefore decreasing the revenue to the small cities."