A new way to collect old tax
BRECKENRIDGE – Developers working in Breckenridge can expect to see a change in how the town collects sales tax for construction materials – and some are already saying they don’t like it.
The town depends on construction suppliers to collect the town’s sales tax from contractors at the point of sale. But some purchases are exempt, and town sales tax auditor Lance Hillis is spending more and more time trying to make sure everyone pays up.
Tuesday, Town Finance Director Judy Ferris presented three alternatives for the town to consider to make the process easier. She emphasized that town officials want input from members of the construction industry before changing how they collect taxes.
One option involves collecting all the sales tax at the end of the process, before a certificate of occupancy (CO) is issued. Town building officials issue COs after the last building inspection; a CO verifies that a building has been constructed to code and is ready for people to move in.
Another option is to collect the tax in payments, each of which would be negotiated with the town.
The easiest way for the town – but not necessarily builders – would be to take the estimated value of a completed home, divide that in half and tax that amount. Town officials say construction materials account for anywhere from 50 to 65 percent of the cost to build a home.
But developers don’t like the idea of paying the tax up front. And lenders would prefer to see their money at work on actual construction before paying into town coffers.
To Ferris and Hillis, it’s merely a matter of efficiency and a way to ensure builders pay the tax.
“We’d like to have the 50-percent rule,” Ferris said. “We think it’s conservative. And, sure, we might miss some of what might be owed, but we think it’s an easier way to administer this, and it’s simpler for people to understand.”
Hillis said he understands the frustration expressed by many developers, who don’t want to deal with one more layer of paperwork to build a structure.
“They’re not keen on paying it ever – who’s happy about paying a tax?” he said. “This is nothing more than what they should be paying anyway. Whether it’s up front, along the way, or at the end, there’s nothing new here. We’ll see. I want to see what works for everybody.”
Who owes what can be just as confusing as the tax-collection process.
A contractor buying supplies – from a box of nails to the wood that makes up the frame of a home – is subject to paying local taxes. To which municipality he pays the tax depends in part where the sale took place, but even more specifically, where ownership of the materials was transferred.
For instance, a contractor who buys supplies at Home Depot in Avon will pay Avon’s sales tax. If Home Depot delivers the same materials to a construction site in Breckenridge, then only Breckenridge’s 2.5 percent sales tax applies.
“It has to do with the transfer of ownership and where the transfer is really taking place,” Ferris said. “Take a concrete truck. It is physically evident that when the truck comes into the town, they still own the concrete. They still have the risk until they get the concrete to the jobsite and pour it.”
Other materials are more difficult to track – especially if an out-of-state building materials specialist makes a one-time sale to a contractor in Breckenridge.
“The state of Colorado is one of the most difficult states to do business in,” Hillis said. “There are multiple jurisdictions, all with their own rules. It’s very seldom (a purchase) should be excluded from any type of a local tax at all.”
Jane Stebbins can be reached
at (970) 668-3998, ext. 228, or
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