Blytheville voters approved a 1% sales tax last week that will be dedicated to paying a $3.7 million tax bill from the Internal Revenue Service.
The northeast Arkansas city failed to make payments of federal payroll taxes in the third quarter of 2007, and the first, third and fourth quarters of 2009 and 2010.
The tax liability totaled $2.3 million, and the IRS added $1.4 million in penalties.
The audit by the Arkansas Legislative Joint Auditing Committee in June 2011 that found the tax problem also cited discrepancies with taxes reported and paid by city workers from 2004 to 2008.
Blytheville is now making a monthly payment of $10,000 on the tax bill.
The tally was 1,037 in favor of the additional tax and 702 opposed. The sales tax will begin in July and be collected for 15 months.
The Arkansas State Police began an investigation two weeks ago to determine if there were criminal violations involved in the failure to pay the payroll tax.
District prosecuting attorney Scott Ellington said he sought the probe because of the size of the debt and the city’s failure to resolve it.
The IRS placed liens on city property, including vehicles, in September 2011. The city also was asked to close a golf course and to sell 700 acres of farmland it owns to satisfy the debt.
Mayor James Sanders said Blytheville will negotiate with the IRS to reduce the assessed penalty. Sanders said passage of the measure was a vote of confidence in the city administration’s ability to resolve the situation.