In an attempt to weed out people falsifying tax reports, a new ordinance decrees business owners must sign their name saying they have and will continue to pay their portion of the state sales tax when they apply for or renew their business license.

“It might be easy to not pay into the tax,” Tombstone City Clerk/Manager George Barnes said, “but it’s damn painful when you get caught.”

Barnes made note of the conjunction ‘when’ and said that it was not an ‘if’ statement—he is sure business owners who evade taxes will eventually be found by the Arizona Department of Revenue.

He said he hopes the new ordinance will incentivize business owners even more to be law-abiding citizens.

“We’re just trying to encourage people directly not to get in trouble,” he said.

There are not any additional penalties associated with this ordinance that were not in place before—business owners were subject to losing their license prior to the ordinance’s passing.

“This will just bring it into a tighter process,” Barnes said. “It’s everyone’s obligation to be current anyway.”

Hal Coughley, owner of Cochise Trading Company, said the ordinance seemed a bit unnecessary.

“I don’t have any problems with the ordinance,” he said. “I mean, the state would come and find me if I wasn’t paying my taxes anyway.”

Since Tombstone is a small tourist town, the main form of payment is cash as opposed to debit and credit cards. While this is not a problem, per se, it does get rid of any paper trail and make it harder for the state to verify.

“It’s hard to determine how much is taxable when your business is working out of a cigar box since no one can check it,” he said.

When an auditor comes down from Phoenix and performs audits, which Barnes said is a regular occurrence, most of the time the business owes little to nothing. In the past, though, he has seen some that have been avoiding the tax for far too long and get buried under the penalties.

When a business does not pay into the sales tax and gets found out, it faces two penalties: First, the owner must pay interest per day until the full amount they owe is paid to the state. This interest rate varies and is set by the state itself. Second, the owner must pay an additional 25 percent of what the auditor found they owe. This means if a business has missed paying $1,000 into the sales tax, they must pay a grand total of $1,250 before the interest is calculated into it.

“The penalties are tough enough to make someone want to pay into the sales tax,” Barnes said matter-of-factly.

Barnes said whenever he sees a business that does not pay their portion of the sales tax, it can be attributed to one of two reasons.

The business owner might be faced with something like having enough money to either pay into the tax or pay their workers, and the sales tax took a backseat when it was due. “When in a pinch, business owners would rather do what they have to do to stay afloat,” Barnes said.

Another reason he has seen is simply that the business owner was just confused about what was taxable. He pulled out a binder with more than 70 double-sided pages worth of tax information detailing the Model City Tax Code Tombstone follows. Barnes said some of the business owners, especially the new ones, just are not familiar with all the rules and they have every intention of paying the tax, but they may have miscalculated what all is included in the sales tax.

“When the state comes to look, though, they know the rules really well,” he said, advising that business owners should invest in hiring an accountant to make sure they do not have to pay the penalties.

For either reason that the business owner does not pay into the tax, though, it would be easier for them to just not pay into the tax at all anymore until they are found out.

“Once you get behind, it’s hell to get back out,” he said, noting that it immediately raises a flag that one month the tax was not paid but the next it was.

Barnes advised that, at the end of each business day, the owner separate the amount they earned from the amount they need to pay toward the sales tax.

“Put the money in a different box or in a separate bank account, anything to move it away from your profits” he said. “Otherwise, the temptation is huge to spend it on yourself.”

All in all, Barnes said the city does not experience more businesses evading paying into the sales tax than average, or even businesses being audited.

“It’s not any different in Tombstone than it is in Tucson,” he said with a shrug and a nod.