Interest fee

More Colorado towns are moving to avoid taking advantage of state-imposed fees | Company

Three of Colorado’s largest cities have changed or are in the process of changing municipal laws that allowed for the collection of sales taxes on government fees.

Denver adopted on Monday, in first reading, an ordinance “to exempt from taxes certain expenses”. If the measure passes second reading on August 22, it will become law.

Under Senate Bill 21-260, a 27-cent levy must be collected and paid to the state by retailers “on all motor vehicle deliveries to a location in Colorado with at least one personal property bodily subject to state sales or use tax.”

The fee, which took effect July 1, is part of the transportation program the Legislature passed in 2021 that is expected to generate hundreds of millions of dollars in coming years for road improvements, transit and electric vehicle programs.

But the fees have caused confusion not only among the retailers that apply them and their accountants, but also among local governments.

While the Legislature wrote an exception to tax the fee into state law, Colorado cities like Denver, Aurora, and Colorado Springs had laws on the books defining any government fee as part of the “purchase price total”.

“State law and city law were in conflict (on) the tax fee, and that’s not OK,” said Denver City Councilwoman Amanda Sawyer, head of the finance and administration committee. the governance. “We shouldn’t tax the fees.”

It wasn’t a huge amount, but the order fixes the problem “in principle,” Sawyer said.

Adding the $0.27 fee to a $10 taxable good delivered to Aurora, for example, results in a total purchase price of $10.27, which was subject to the 3.75% tax rate from the city. This adds 1 cent to the total amount customers should pay.

But Aurora finalized a change to its sales tax law last week, At-Large Advisor Dustin Zvonek said.

“Any new state fee, or city fee for that matter, we would be prohibited from collecting taxes on it,” Zvonek said. “It really had to happen.”

Colorado Springs is also evaluating the change, which could be presented to the city council in September, chief financial officer Charae McDaniel said by email on Tuesday.

The Colorado Municipal League began surveying its member cities, but many were in the process of changing the law like Denver, Aurora and Colorado Springs. So he sent proposed language to cities to change the definition of “total purchase price” in their own sales tax law.

The league, which seeks to “protect and promote municipal interests and priorities,” estimates that 69 self-governing cities collect their own sales taxes.

“I’d be surprised if there’s any left on their tax base by October,” executive director Kevin Bommer said via email.

Zvonek said city finance officials estimated that not taxing the fee would mean an estimated $250,000 a year drop in potential revenue “between delivery fees and scrap tire fees.”

“This did not include the savings that will come from waiving baggage fees that will come into effect in January 2023,” Zvonek said via email.

Denver’s bag fee would also not be taxed if the measure passes second reading on Monday.

“We need to reduce costs to taxpayers and deal with increases in the cost of living,” Zvonek said. “These fees are always minimal when created, a quarter percent here and a half percent there. But they add up. The practice of taxing fees was not defensible. This is another way for the government to save taxpayers money.