Audit Of The Reliability And Accuracy Of Commercial Motor Vehicle Tax Data Administered By The Department Of Finance

Audit Report In Brief

The Department of Finance (DOF) is responsible for collecting City revenues efficiently and encouraging compliance with City tax and other revenue laws.  One such revenue, DOF collects is a Commercial Motor Vehicle Tax (CMVT).  DOF collected $47.5 million dollars in CMVT revenue for Fiscal Year 2008.

The CMVT was first levied in 1960 on vehicles used for the transportation of passengers and on all other commercial trucks and vehicles. The tax is charged at different rates.  DOF administers the CMVT for the following vehicles: medallion taxicabs, non-passenger commercial motor vehicles weighing more than 10,000 pounds (and those weighing less than 10,000 pounds if they are registered outside of New York City), and all motor vehicles used for transportation of passengers that are registered outside New York City but used within the City limits.  All other types of motor vehicles are handled by the State Department of Motor Vehicle (DMV). Every month, the DMV electronically forwards to DOF the data for the vehicles it registers that are subject to the CMVT.  DOF handles the CMVT billing and collection process.

Audit Findings and Conclusions

The CMVT data exists in a secure environment and is readily accessible to all essential users identified by DOF. The CMVT data is generally accurate and reliable for collection purposes, and generally contains the required information for enforcement and penalty collection purposes.  However, while conducting the tests that addressed the objectives to this audit, we identified an outstanding unpaid balance of $8 million.  Included in this balance were accounts that were underpaid due to dishonored checks but that nevertheless received a tax stamp.  Also, DOF has a rule that permits a tax stamp to be issued if an account owes less than $5.  In addition, DOF does not notify account holders who have made an overpayment.  Finally, CMVT billing periods are kept independent of each other. As a result, previous balances are not carried over to the next billing period, allowing accounts with an outstanding balance for a prior period to nevertheless receive a tax stamp in subsequent periods.

Audit Recommendations

To address these issues, we make five recommendations, that DOF should:

• Ensure that the billing process is corrected and previous years’ account balances are carried forward.
• Develop a memo of understanding with the Taxi and Limousine Commission (TLC) and New York State DMV to ensure that all CMVT revenue is collected before the TLC approves the licenses for medallions and non-medallion automobiles, thereby improving its collection of outstanding CMVT balances.
• Comply with the Rules of the City of New York, Title 19, to ensure that all uncertified checks have been converted to collectible funds before issuing a tax stamp.
• Identify and notify account holders of overpayments to allow them the opportunity to request a refund in writing to DOF.
• Determine whether the system should write off account balances of less than $5 or carry them over to the next billing period.