This past March, Annie Hughes received an unexpected tax notice at her N. 2nd Street apartment in Midtown.
It was from Keystone Collections Group, and it told Hughes that she was delinquent in paying the occupational assessment tax, a flat annual tax assessed by the Harrisburg School District, for 2016. In addition to the $120 base rate, the notice said she would have to pay an additional $50.20 in fees and penalties.
“I didn’t even know that such a tax existed,” Hughes recalled recently, adding that the delinquent notice was the first time she learned she even owed it. “If I had gotten the first bill, I would have immediately paid it.”
Hughes called the company. A representative told her that they had sent the original bill in July 2016, but Hughes was certain she had never received it. She had moved to her apartment in October 2015 and had paid local income tax, also collected by Keystone, the following February. For that reason, she believed Keystone would have had her correct address by the time of the July mailing.
Around this time, Hughes saw that a neighbor, Timi Lesperance, had posted in a Midtown Facebook group about the same issue—she, too, had received a delinquent notice but no initial bill. In the comments, residents quickly began chiming in with complaints of their own. Soon, they learned of more than 30 neighbors who said they had never received their original tax bills.
Both Hughes and Lesperance eventually sent Keystone a check for the base tax, along with a note saying they were contesting the late fees. They also filed consumer complaints with the state attorney general. Then, in April, they went to a school board meeting and requested that the district investigate the situation.
In May, after the attorney general’s office had forwarded their complaints, a lawyer at Keystone named Michael Mazzella sent formal letters of explanation to Lesperance and Hughes. The letter claimed that original bills had been mailed the previous summer (Keystone enclosed a “reprint” dated July 2016) and that nothing had been returned to the company as undeliverable.
The letter also claimed the company had performed an “internal audit” of “accounts that were mailed from various trays of mail.” The audit showed that some residents had paid their bills in a timely fashion, Mazzella wrote, which “further proves that letters were sent in July.” The letter concluded by asserting that the fees and penalties were valid and demanding payment within 30 days.
Frustrated, Hughes and Lesperance both decided to pay the full amount, while still holding out hope for further action from the attorney general or the school district.
“I ended up, in the interest of a constable not showing up at my house, paying that $50,” Lesperance said.
While going through this process, Hughes and Lesperance wondered: Where does that $50 late fee end up anyway? According to the district’s contract with Keystone, it seems that the two entities share it.
A $12 “statutory penalty” goes to the district, and a $13.20 “cost of collection” appears to go to Keystone (the contract language is somewhat vague). It’s unclear from the contact who gets the biggest piece of the pie—a $25 “late filing fee.”
All told, the school occupancy tax brought in $588,000 for the district for 2016 through Jan. 15, 2017, according to the district, responding to a right-to-know request.
Matt Krupp, the chair of the school board’s budget and finance committee, described the missing notices as a real concern for residents. He said it was “problematic” that the administration had not provided an answer to his committee since residents brought it to the board’s attention last April.
“We’ve repeatedly asked that the administration look into it and make sure it’s just an isolated incident,” Krupp said. “It’s unfortunate that it’s five months later and we’ve gotten no clear answer as to what, if anything, the district has learned from Keystone on this issue.”
In the meantime, the missing notices remain unexplained. Karen Mazurkiewicz, a spokesperson for the postal service, said that neither the consumer affairs nor business mail entry units reported any concerns about a mailing from Keystone in July 2016.
And according to Joe Grace, director of communications for the state attorney general, the office has not taken any action against Keystone. However, Grace directed any consumers who feel they have been victimized to contact the consumer protection bureau.
According to its website, Keystone Collections Group has been collecting local taxes in Pennsylvania for 30 years, bringing “integrated state of the art technology and unparalleled industry knowledge” to the field of municipal and school tax collection. The company has collected local income taxes in Dauphin County municipalities since 2012, including in Harrisburg.
In late 2015, the school district approved a contract to switch from its prior collector of the occupational assessment tax to Keystone, citing an initiative in the school’s fiscal recovery plan to improve collections. The contract provided that Keystone would be paid at the rate of $1 per bill issued, plus postage.
According to school board meeting minutes, the district believed that Keystone’s access to employment information from income tax collection would help it locate taxpayers.
Keystone declined to make a representative available to be interviewed for this story. In response to emailed questions, the company provided a one-page statement explaining that it had developed a “comprehensive” mailing list in 2016 that formed the basis of its initial mailing that July.
The company then sent delinquent notices after cross-checking payment data with the original list. “Every taxpayer name on the delinquent list came directly from the original mailing,” the statement said.
Keystone also said that the district had hired it to “bring efficiency and compliance to its occupation tax administration” and that, before 2016, “occupation tax compliance was not strictly enforced in the District.” The company also noted that its penalties and fees are authorized under state law.
Hughes doesn’t dispute Keystone’s legal authority, but just wants to make sure the company is assessing penalties fairly. To that end, she has one critical piece of advice for Harrisburg residents—make sure that you’ve received your 2017 occupational assessment tax bills, which the company says were mailed in July. If you haven’t, call Keystone Collections to pay it.
Keystone does encourage payment online. However, paying the school occupational tax online requires an invoice number, which presents its own confusion. After all, if residents have not received an invoice, they will not have an invoice number to input, so will not be able to pay the bill through the company’s website.
Hughes added that she did receive her 2017 bill on time, but knows several people who say they have not. The penalty period for the tax begins in November. The penalty starts at $12 through December and escalates to $50 next year.
Ultimately, for Hughes, the issue has less to do with the legality of the penalties and more to do with fairness.
“Penalties can be fair, but they need to be based in reality,” she said. “This wasn’t the residents’ fault, and they shouldn’t be charged a penalty.”
To make a payment, call Keystone Collections at 717-978-0300. If you have an invoice number, you can pay online at www.keystonecollects.com.