Lake Stevens council waives interest penalties after city tax-form error affecting local pull-tab operators

The Lake Stevens City Council voted March 11 to waive interest penalties for a company that self-reported late gambling taxes and for five businesses that paid based on an incorrect city tax form that listed the pull-tab tax rate at 3% instead of 5%.

Finance Director Barb Stevens told the council staff discovered the problem after a company contacted the city to report it had been paying gambling taxes to Snohomish County rather than to Lake Stevens. The company corrected its registration and paid taxes for 2021 through 2024; Stevens said interest penalties can only be applied three years in arrears, and the interest due for 2022'24 in that case was $201.

An internal review found the city's tax form incorrectly stated the pull-tab rate as 3% rather than the correct 5%, and staff identified five additional businesses that paid based on the wrong rate. Stevens said those five businesses paid the amounts printed on the forms and that the under-collected portion for that group totals $8,335; the city has corrected the form and will notify taxpayers and request the additional tax amounts for 2022'24. Stevens said the city will pursue penalties and interest for taxpayers who failed to file returns.

Council moved to waive the interest penalties for National Entertainment Network (the company that self-reported) and for the five businesses that submitted payments based on the incorrect rate. The motion carried on voice vote.

Stevens said the city will continue its audit of revenue sources; staff plan to use a newly approved senior accountant position to perform routine internal reviews and reduce reliance on reactive processes. She said the state gambling commission report and the city's own records were used in the review, and that nonprofits conducting bona fide charitable raffles remain exempt from gambling tax.