City Council Approves Cap on Sales Tax Vendor’s Fee, Freeing Funds for Economic Development

During the May 3 regular meeting, City Council unanimously approved an ordinance which will place a cap on the Sales Tax Vendor’s Fee and will free up additional funds for economic development purposes.

The Sales Tax Vendor’s Fee is a credit the City of Grand Junction allows a retailer to take against sales tax collected on behalf of the City. The credit was designed to offset the administrative expense of collecting and reporting the tax. It was established prior to the introduction of automated systems and accordingly was more aligned with the cost at the time. Now due to the prevalence of point-of-sale systems, automated bookkeeping and computerized tax preparation programs, the credit is proposed to be capped to $500 per month per sales tax account.

EcoDevoThe estimated amount that would be freed up by implementing the $500 cap is between $365,000 and $375,000 per year and would increase or decrease correspondingly with sales tax revenues. These funds will become a sustainable source of funding for economic development in the City’s General Fund.

The cap that was approved by Council will affect 31 businesses in total with only six of those being businesses that are locally owned. The City has approximately 4,800 sales tax accounts.

According to City Manager Greg Caton, “This is something the City has been reviewing for some time that simply makes sense. The fee was originally implemented at a time when the administrative effort that went into collecting City sales tax was much more cumbersome. Technology has greatly improved that situation so we felt it was time to re-assess. Creating a sustainable funding source for economic development definitely makes this change something that will directly benefit the community. We worked collaboratively with the Grand Junction Economic Partnership and the Grand Junction Chamber on this and we appreciate their leadership regarding the change. We value their partnership and look forward to working with them on future economic development initiatives.”

Most cities across Colorado have limited or eliminated the vendor’s fee. Out of the 72 Home Rule Municipalities in Colorado that administer and collect their local sales taxes 30 allow no vendor’s fee credit at all and 22 have a cap that averages $170 per account.

A retailer that would be subject to the proposed cap of $500 per month would have taxable sales in excess of $500,000 per month and $6 million annually. The majority of the businesses subject to the cap are very large, non-locally owned businesses that are retaining between $16,000 and $97,000 in vendor’s fee credit each year per business.

This new ordinance will take effect on January 1, 2018.

Contact:  Sam Rainguet, Communications Manager       970-244-1507 or samr@gjcity.org    

 

 

 

 

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