Reporting Error Likely Cause Of Cookeville Tax Shortage

State officials trying to figure out how a reporting error could have left Cookeville’s revenues short during the summer sales tax holiday.

The law eliminating the sales tax on groceries required that cities and counties not lose any revenue from the legislature’s decision. Representative Ryan Williams said Cookeville showed a shortage of some $620,000.

“The finance team at City of Cookeville and City Manager (James) Mills has been working with me in my office, Department of Revenue and the comptroller’s office, to figure out why this reporting error is happening here,” Williams said. “I can tell you that that reporting error is not happening in every city across the state. And so we’re working frantically trying to figure out what that solution is.”

Williams said the current best guess is that some local retailers miscalculated or under reported tax revenues.

“That number was a huge detriment to the city, and it’s my goal and hope that we can figure out what’s going on by communicating with those retailers that we suspect are doing it incorrectly,” Williams said.

Williams said the problem seems to be limited with other cities and counties statewide not reporting lesser revenue during the three-month sales tax event.

“But the state can’t make the city whole if they’ve never received the dollars in order to make them whole,” Williams said. “And so it’s kind of a unique situation that we, quite frankly, have yet to been able to figure out how or why it’s happening.”

Mills had expressed concern about the impact of the sales tax holiday two years when it was a shorter period, noting the impact on local revenues. Sales tax make up a large portion of Cookeville’s annual revenue.

Meantime, local officials had asked Williams for help on a deeper sales tax issue, giving money back to local governments that was taken during a 2000 budget shortfall. Williams said based on the state’s lower-than-expected revenues this year, he does not expect that to happen.

“I’m not hopeful,” Williams said. “I’m always optimistic because I’m a glasses half full kind of guy. But based upon those sales tax revenues plateauing and not reducing, I’m not sure state government will have the ability to do it this year.”

Williams said revenues did not meet expectations in the second half of 2023, creating a miss on projections of about $418 million.