The Herald, Sharon, Pa.

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January 16, 2013

Wage-tax claim pits Hermitage vs. Sharon

SHARON, HERMITAGE — Hermitage city and school district are due about $130,000 in wage taxes from the city of Sharon, a recently filed lawsuit claims, and the company hired to handle that money is trying to destroy its records.

In a complaint filed Jan. 8 in Mercer County Common Pleas Court, former receiver of taxes Sherry Iversen said the company Sharon hired in 2007 to collect earned income taxes failed to distribute $128,443.57 to the Hermitage taxing bodies.

“I’m not going to comment on a matter that’s before the courts,” Sharon City Manager Scott Andrejchak said. “Obviously there needs to be an accounting to verify their claim.”

Central Tax Bureau of Pennsylvania, commonly known as Centax, collected resident and non-resident taxes for Sharon and was supposed to forward payments to the workers’ home municipalities.

After reviewing Hermitage residents’ tax returns, Iversen said a large sum of tax revenue withheld by employers in Sharon and submitted to Centax were not passed on.

“Sharon, through its agent, has illegally failed to distribute earned income tax revenue that belongs to Hermitage for tax years 2007 through 2011,” the suit states.

During that time, Andrejchak said city officials had “very little to do with the collection process.”

The lawsuit names the city of Sharon and Travelers Casualty and Surety Co. of America, Connecticut, the bond insurance company for Centax, as defendants. Centax, whose Bridgeville office handled Sharon’s accounts, is not named as a defendant in the suit.

In a statement e-mailed to The Herald, Hermitage wage tax solicitor Ronald P. McCall said, “The timing of the lawsuit was largely the result of the fact that if the funds are not available through Centax, the Hermitage Receiver of Taxes wanted to make sure to make a claim against the Centax bond in a timely manner.”

Centax went out of business in fall 2012 and in December petitioned through its receivership to destroy tax and business documents kept in leased premises.

The company’s receiver, Campbell & Levine law firm, Pittsburgh, claimed the materials are “not only unnecessary to the wind-down efforts, but are a burden to its efforts” and the receiver doesn’t have money to pay rent for the storage space.

The city of Sharon on Jan. 8 filed an official objection to Centax’s request to destroy their records. In the motion, Sharon’s attorney writes that the city is distressed and unable to pay the $136,092 Hermitage claims Centax did not forward.

“It’s a situation that’s affecting a lot of communities,” said Andrejchak, noting that Centax collected taxes for more than 20 entities in the state.

Sharon needs the company’s records to determine the following: The amount of taxes collected and not distributed to other municipalities; whose taxes were or were not collected; to seek redress against the bond company; and to recoup the lost taxes.

Officials believe that the loss in earned income taxes could be several hundred thousand dollars and if there was a loss of emergency management services taxes – an annual fee also handled by Centax – that could also be substantial for Sharon.

If the motion to destroy the records is granted before the city can recover documents pertinent to its case, the city will be “irreparably harmed” in a manner that far outweighs any harm from preserving the records, the objection states.

Iversen requests in the court order Sharon to pay the taxes due plus costs and interest. According to a letter from McCall dated Aug. 13, Iversen sent “numerous claims” to Centax regarding these taxes with “limited success.”

At that point, Hermitage was owed $67,530 in earned income taxes from 2011 and a total of $68,561 from 2005 to 2010, the letter states.

“We are very interested in getting to the bottom of it,” Andrejchak said. “The questions of what’s owed will have to come out in the course of litigation.”

Pennsylvania went to a countywide earned income tax collection system in January 2012, and Berkheimer and Associates was contracted for Mercer County’s government entities.

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