Sandy Springs fears ZIP code errors could cut sales tax proceeds

The city of Sandy Springs fears it’s getting stiffed on its share of sales tax revenues due to ZIP code confusion that leads some businesses to incorrectly report themselves as being in Atlanta.

But the evidence is murky as to whether it’s an actual problem and if so, how big the losses are.

City officials could not give a current example of such a business and have never conducted an audit to see whether any are misreporting. The neighboring city of Dunwoody said it occasionally sees a small number of sales tax miscalculations, but has auditing measures to catch them, and the state Department of Revenue says it has similar mechanisms.

Sandy Springs’ concerns date back to the city’s 2005 incorporation in ZIP codes that once were just called “Atlanta” or other city names. But officials have revived fears because of recently approved sales tax hikes — from 7 to 7.75 percent in Fulton County and from 8 to 8.9 percent within Atlanta — that will directly fund city transportation projects.

“It’s always been confusing, but now you’re talking about real money,” said Sandy Springs Mayor Rusty Paul at the Jan. 3 City Council meeting, where councilmembers raised the fears.

ZIP codes can be confusing. While they often carry a city name, ZIP codes are simply mail delivery route areas created by the U.S. Postal Service for its planning convenience. They rarely match actual city borders and are sometimes changed. Eight different ZIP codes cover parts of Sandy Springs, some entirely within the city borders, some overlapping with such cities as Atlanta and Norcross.

The Postal Service designates one or more “preferred” city names for each ZIP code. In terms of getting mail, it often doesn’t matter what city name someone uses as long as the street address and ZIP code number are correct. City Communications Director Sharon Kraun, a Sandy Springs resident who has long worked on the sales tax issue, said she once tested that herself.

“I put my daughter’s name as a city name. I still got [the mail],” she said. “I put my dog’s name and still got it.”

In sales taxes, ZIP code names may matter a lot more. Sales taxes are a combination of state, county, local and, in some counties, MARTA taxes. Businesses collect the taxes and pay the revenue to the state, which then distributes the local shares.

The concern, Kraun said, is that some businesses use software that automatically calculates the tax on a purchase by ZIP code rather than by an actual city map. If “Atlanta” is the preferred city name for a ZIP code covering both cities, the fear is that Sandy Springs loses its tax and Atlanta incorrectly gets it instead.

Kraun worked on the ZIP code issue several years ago with former Mayor Eva Galambos. At that time, Kraun said, they found several companies — especially online retailers — that incorrectly forced Sandy Springs customers to use a default “Atlanta” address that miscalculated the sales tax as if they were in that city. One example Kraun gave was the clothing company Land’s End, which she said no longer has that problem.

Kraun could not cite a current example of a business that miscalculates its sales tax. An informal Reporter Newspapers review of receipts from a few Sandy Springs restaurants and grocers found the correct tax calculated. The giant online retailer Amazon.com also calculated the correct tax for a purchase made to a Peachtree-Dunwoody Road address in Sandy Springs using “Atlanta” as the city name in the 30342 ZIP code, which overlaps both cities.

Sandy Springs has never performed a formal audit or inventory of the sales tax problem, Kraun said, and has had few discussions with other cities or the state about it. “There’s not a way to calculate how much we’re losing,” she said.

Dunwoody isn’t concerned, according to city spokesperson Bob Mullen. According to Dunwoody Finance Director Chris Pike, Mullen said, “those problems are few and rarely pop up, and in most cases it’s a simple misunderstanding … He mentioned it potentially evens out in the grand scheme of things as it’s not something on a grand scale or of a critical mass.”

The city of Atlanta’s press office did not respond to questions about the issue, while the city of Brookhaven said it is not aware of any sales tax collection confusion.

The state Department of Revenue has a “Business Occupational Tax Submittal System” to catch such mistakes, according to spokesperson William Gaston. He said the program allows cities to submit files about which businesses are registered within their borders, which the department then uses to check against sales tax collections.

Sandy Springs sales tax fears are complicated by another motive: civic pride and branding. City leaders have long pushed residents to call the area “Sandy Springs” rather than “Atlanta” as community-building.

“There was the civic piece of it and the financial piece of it,” Kraun said of Galambos’s ZIP code interests.

In 2012, the city successfully pushed the Postal Service to conduct a mail-in vote on making “Sandy Springs” the preferred name for local ZIP codes. A majority of residents voted yes, but a needed supermajority of businesses did not, Kraun said, likely because of the prestige and national familiarity of an Atlanta address.

Now, Kraun said, city staff members are looking into a possible re-vote, or even getting a single ZIP code to cover the entire city.