Countywide : County Protests State Tax Claim

County government officials are disputing a state claim that calls for the county to repay Sacramento $3.7 million in sales tax revenue.

In a letter Tuesday to the State Board of Equalization, Board of Supervisors Chairman Harriett M. Wieder said the county was being unduly burdened by the claim and called for a new audit of the refund demands.

County officials have estimated the county’s obligation at about $700,000.

Last spring, state tax notices went to all local governments in California asking for repayment of a portion of sales taxes distributed by the state. The claims stem from a 1990 state Supreme Court ruling which found that suppliers improperly charged sales taxes on materials sold to contractors working on federal government defense projects.

Defense contractors successfully argued that the equipment and supplies used in the construction of defense systems should be tax-exempt.

In her letter, Wieder said that very few suppliers to aerospace and defense systems were located within unincorporated areas of Orange County, which are governed by the county. The county’s assessment may have been inflated when refunds owed by the Orange County Transportation Authority were inadvertently added to the county’s bill, officials said Tuesday.

“Orange County, like all local governments throughout California, is undergoing a severe budget crisis, mainly due to lack of adequate funding and property tax cuts by the state,” Wieder stated in the letter. “We ask that this situation not be made worse by an over-allocation to this county of sales tax refunds.”

Jim McConnell, the county’s accounting operations manager, said it could be as much as a year before a final decision on the county’s bill is made.