HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/03/2022 - FIRST READING OF ORDINANCE NO. 053, 2022, AMENDING Agenda Item 12
Item # 12 Page 1
AGENDA ITEM SUMMARY May 3, 2022
Accounting, Sales Tax, Treasury
STAFF
Jennifer Poznanovic, Project and Revenue Manager
Ryan Malarky, Legal
SUBJECT
First Reading of Ordinance No. 053, 2022, Amending Certain Sections of Chapter 25 of the Code of the City of
Fort Collins Relating to the Imposition, Collection, and Enforcement of the City’s Sales and Use Tax.
EXECUTIVE SUMMARY
The purpose of this item is to amend Chapter 25 of the City Code concerning sales and use tax. The updates
include revisions to the Grocery Tax Rebate Program to provide greater administrative flexibility to staff to aid
in alignment with the ongoing City-wide initiative to broaden access to City income-qualified programs. Other
updates include, but are not limited to, clarifying definitions for the Manufacturing Use Tax Rebate Program,
increasing the dollar threshold that determines when written agreements for tax settlements are required,
creating an exemption from sales tax for the recently adopted disposab le bag fee, and removing the tax
exemption for cigarettes.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinances on First Reading.
BACKGROUND / DISCUSSION
Code changes being requested are as follows:
CHAPTER 25, ARTICLE II
Sales Tax Rebate on Food
In collaboration with the City-wide consolidation of income-qualified programs and the Get FoCo application,
staff recommends amending City Code Chapter 25, Article II, Division 3 to expand the grocery rebate program
from a time-limited application period to a 12-month application period to be specifically established by the
Financial Officer. Staff also recommends removing the specific requirement that an applicant’s income be
verified through Federal income tax returns, leaving staff the fle xibility to determine income by other means,
such as eligibility for Larimer County’s Low-Income Energy Assistance Program or the Supplemental Nutrition
Assistance Program with the goal being making the application process as convenient for applicants as i s
reasonable. In alignment with other income programs across the City, staff recommends aligning income
eligibility from 50 percent annual median income (AMI) for the applicable household size to 30 percent AMI.
Staff is recommending that provisions be add ed to the Code such that households that fall within with 30 to 50
percent AMI range and have received a rebate in 2020 or 2021 remain eligible for the rebate. An update to the
Code section addressing payment of the rebate will allow more flexibility for a dministration of the rebate. A final
change will require the Financial Officer to establish rules, regulations and internal guidelines providing for the
administration of the rebate program that are consistent with the Code.
Agenda Item 12
Item # 12 Page 2
Definition of Manufacturing Equipment
In City Code Section 25-63, a more detailed definition of manufacturing equipment will help both staff and the
taxpayer have a better understanding of the definition. Staff also recommends the definition be added to the
Sales and Use Tax section in City Code Section 25-71 to provide consistency between the different areas of
the Code.
CHAPTER 25, ARTICLE III
Disposable Bag Fee Tax Exemption
Staff recommends creating a sales tax exemption for the disposable bag fee that became effective May 1,
2022. The bag fee is arguably part of the purchase price to which sales tax is imposed, which was not the
intent in creating the bag fee. To address this issue, staff is requesting that the exemption be effective
retroactively to the effective date of the disposable bag fee. Staff have communicated to the affected grocery
retailers that staff would be requesting this change at this meeting.
Definition of Manufacturing
Staff recommends adding a definition of “manufacturing” in City Code Sec tion 25-71 that contains the
definitions applicable to sales and use tax. The intent is to align the sales and use tax definitions with the
definitions applicable to the Manufacturing Use Tax Rebate Program.
Definition of Engaged in Business
Staff recommends amending the definition of “engaged in business in the City” in City Code Sec tion 25-71 to
not include common carrier as a means of delivery for businesses engaged in business with the City. This
revision will align the Code with the historical practice of the Sales Tax department.
Removal of the Exemption for Cigarettes
Staff recommends removing the sales and use tax exemptions for cigarettes. Staff forecasts this change will
result in increased revenue for the City. Currently the City receives the State’s shareb ack. Starting in 1973, this
tax was $0.20 per pack with 27 percent to cities and towns. However, the tax increased to $0.84 in 2004 yet
shareback rate and percentage remained the same. In 2021, the City’s shareback was $343 ,000. Staff’s
estimate if the exemption is removed is $1.25 million, with $900,000 per year of net revenue from the removal
of the exemption.
Compromise and Settlement by Financial Officer
Agenda Item 12
Item # 12 Page 3
Staff recommends amending the language in City Code Section 25-198(c), concerning the authority of the
Financial Officer to compromise and settle any assessed or potential claim to taxes, penalty, interest, collection
costs, and other charges due to the City under Chapter 25, Article III concerning sales and use tax. The
proposed amendment would increase the threshold at which a written settlement agreement is required from
an assessed amount (tax, penalty, or interest) of $2,500 or more to $10,000 or more. This revision is intended
to reflect inflation and will closely align with the historical practic e of the Sales Tax department in granting
waivers of interest or penalty for good cause to taxpayers. The department will still maintain written
documentation of any settlement below the threshold in the form of a written opinion approving the settlement
signed by the Financial Officer or their designee and a letter to the taxpayer, but not in the form of a separate
written settlement agreement.
CHAPTER 25, ARTICLE V
Telephone occupation tax
Staff recommends revising the payment due date for telephone occupation tax in City Code Section 25-328
from the tenth day of each month to on or before the twentieth day of each month. The purpose is to align the
telephone utility tax return due date with the sales and use tax return due date. Staff also recommend s
revising City Code Section 25-329 containing the interest rate on past due telephone occupation tax to align
with the current rate of interest assessed on past due sales and use tax. The current telephone utility tax rate
of interest is 10% per annum, whereas the sales and use tax rate of interest is 1% per month.
CITY FINANCIAL IMPACTS
Staff’s estimate of net revenue from the removal of the cigarette tax exemption is $900 ,000 per year.
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ORDINANCE NO. 053, 2022
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AMENDING CERTAIN SECTIONS OF CHAPTER 25 OF THE CODE OF THE CITY OF
FORT COLLINS RELATING TO THE IMPOSITION, COLLECTION, AND
ENFORCEMENT OF THE CITY’S SALES AND USE TAXES
WHEREAS, Article XX, Section 6.g. of the Colorado Constitution grants to the City of
Fort Collins, as a home rule municipality, all powers necessary to levy and collect taxes for
municipal purposes, subject to any limitations in the Colorado Constitution; and
WHEREAS, on November 16, 1967, the City Council, in the exercise of its home rule
taxing powers, adopted No. 058, 1967, to levy, collect and enforce beginning on January 1, 1968,
a sales and use tax on the purchase of tangible personal property sold at retail in the C ity and on
certain taxable services provided in the City (the “Sales and Use Tax Code”); and
WHEREAS, the Sales and Use Tax Code is currently found in Chapter 25, Article III of
the City Code, which has been significantly amended many times since its adoption in 1967; and
WHEREAS, Chapter 25, Article II, Division 3 of the City Code authorizes rebates of
City sales tax impose on food to low-income residents of the City, and the City Council desires
to amend the City Code to adjust the threshold of area median income for participation in the
rebate program and to provide increased flexibility in administering the program; and
WHEREAS, City staff has reviewed the Sales and Use Tax Code and has recommended
revisions to clarify definitions and taxable transactions, to remove the exemption for cigarettes,
to clarify that the City’s disposable bag fee is not subject to tax, to raise the dollar threshold for
which written settlement agreements are required, and other changes that may be characterized
as clean-up items; and
WHEREAS, City Council hereby finds that amending the City Code as proposed in this
Ordinance is in the best interests of the City and its taxpayers and promotes the health, safety and
welfare of the community by providing for the accurate and efficient imposition, collection and
enforcement of the City’s taxes.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That the City Council hereby makes and adopts the determinations and
findings contained in the recitals set forth above.
Section 2. That Section 25-46 of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-46. Definitions.
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The following words, terms and phrases, when used in this Division, shall have the meanings
ascribed to them in this Section:
Applicant means a person who applies to the City for a tax rebate under this Division 3.
Household shall mean collectively the applicant and the following who reside with the applicant:
applicant's spouse, parents, grandparents, and applicant's children by birth or adoption, step
children, foster children, and children under legal guardianship, and any other person who the
applicant may claim as a dependent on his or her federal income tax return for whom the
applicant provides a majority of the person’s support for the period during which a rebate is
sought. The City's determination shall be final with regard to eligibility as a household.
Income shall mean:
(1) the gross income for the entire household from any and all sources, including but
not limited to, rental real estate income, royalties, partnerships, S corporations, estates or trusts;
and
(2) plus any nontaxable income including, without limitation, individual retirement
account distributions (not including rollovers), pensions and annuities, social security benefits,
disability benefits, worker's compensation benefits and any other nontaxable income.
Section 3. That Section 25-48 of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-48. Application for rebate.
Application for the sales tax rebate on food shall be made on forms to be provided by the City.
Only one (1) application shall be filed per household. In order to qualify for such rebate, the an
application must be filed with the City between August 1 and October 31 of each year, and shall
be for the rebate of the taxes imposed and paid on food in the prior year during a twelve (12)
month period to be established by the Financial Officer. In no event shall a household receive
more than one rebate for said 12-month period. The Financial Officer or their designee shall
prepare, adopt and make available all forms necessary to apply for this rebate, including
requirements for proof of income. The application shall contain a notice that willful
misstatement, falsification or omission of material fact is a violation of this Section. The
applicant shall attest the application and any affidavits required therewith under penalty of
perjury.
Section 4. That Section 25-49 of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-49. Qualifications.
(a) In order to qualify for the sales tax rebate, all members of the applicant's household must
have resided within the City or the City's Growth Management Area, as defined in § 1-2 and as
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amended, during the entirety of the 12-month period for which the rebate is sought year for
which the application is made. Beginning as of May 27, 2022, T the applicant's household shall
have a total annual income that does not exceed fifty (50) thirty (30) percent of the area median
income for the applicable household size in the Fort Collins-Loveland metropolitan statistical
area, up to a maximum household income of fifty (50) thirty (30) percent of the area median
income for a household of eight (8), as most recently published by the United States Department
of Housing and Urban Development as of August 1 of the year for the 12-month period in which
the tax to be rebated was imposed.
(b) Any household that first qualified for a rebate in 2020 or 2021 shall continue to be
eligible for a rebate so long as the household’s total annual income does not exceed fifty (50)
percent of the area median income for the applicable household size in the Fort Collins -
Loveland metropolitan statistical area, up to a maximum household income of fifty (50) percent
of the area median income for a household of eight (8), as most recently published by the United
States Department of Housing and Urban Development as of August 1 of the year in which the
tax to be rebated is imposed. Any household that first qualified for a rebate prior to 2020 shall
be subject to the thirty (30) percent threshold in Subsection (a) above.
Section 5. That Section 25-51 of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-51. Payment.
The City shall make a single rebate payment to each qualified household for which an
application has been properly filed by joint payment to adult members of the household and to
parents or guardians on behalf of all children of the household. The method of payment shall be
determined by the Financial Officer in conformity with the provisions of this Division. If a
recipient dies prior to the rebate being received or cashed pursuant hereto, any check
representing such rebate shall be null and void, and such rebate shall not become an asset of the
decedent's estate. If the decedent is survived by a spouse who would be qualified as a recipient
for such rebate and is not otherwise included on the joint payment, the City will honor an
application for a rebate by such surviving spouse, even though the application is not timely made
in accordance with the provisions of this Division. If there are multiple recipients on a check and
a recipient dies prior to the rebate being received or cashed, the City shall reissue the rebate
payment excluding the decedent.
Section 6. That Section 25-52 of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-52. Administration.
The Financial Officer shall administer the program established by this Division and may shall
prepare a rebate application form, adopt rules and regulations and internal guidelines consistent
with the provisions of this Division for the proper administration and enforcement of the same.
and The Financial Officer is authorized to audit and verify the applications submitted pursuant to
this Division. Any rebate application form shall require the applicant to verify and sign the
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application under oath. The burden of proving entitlement to a rebate under this Division is on
the applicant. The Financial Officer may require other reasonable information to support the
rebate application
Section 7. That Section 25-63 of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-63. Definitions.
(a) The following words, terms and phrases, when used in this Division, shall have the
meanings ascribed to them in this Section:
Manufacturing equipment shall mean manufacturing equipment to be used in the City directly
and exclusively in the manufacture of tangible personal property for sale or profit equipment to
be used in the City that is necessary and essential to the operation or performance of an
integrated series of operations that places a product, article, substance, commodity, or other
tangible personal property in a form, composition, or character different from that in which it
was acquired, whether for sale or for use by a qualifying manufacturer. The change in form,
composition, or character must result in a new product, article, substance or commodity that is
different from and has a distinct name, character, or use from the raw or prepared materials.
Qualifying manufacturer shall mean an industrial manufacturer who, in an industrial setting, uses
manufacturing equipment to produces a new product, article, substance or commodity that is
different from and has a distinctive name, character or use from the raw or prepared materials
used to manufacture the product, article, substance, or commodity.
(b) Any words, terms and phrases used in this Division not defined in Subsection (a) of this
section shall have the meaning given to them in § 25-71.
Section 8. That Section 25-71 of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-71. Definitions.
The following words, terms and phrases, as used in this Article, shall have the following
meanings:
. . .
Engaged in business in the City shall mean performing or providing services or selling, leasing,
renting, delivering or installing tangible personal property, products, or services for storage, use
or consumption within the City. Engaged in business in the City includes, but is not limited to,
any one of the following activities by a person or retailer:
(1) Directly, indirectly, or by a subsidiary maintaining a building, store, office,
salesroom, warehouse, or other place of business within the taxing jurisdiction;
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(2) Sending one (1) or more employees, agents or commissioned sales persons into
the taxing jurisdiction to solicit business or to install, assemble, repair, service, or assist
in the use of its products, or for demonstration or other reasons;
(3) Maintaining one (1) or more employees, agents or commissioned sales persons on
duty at a location within the taxing jurisdiction;
(4) Owning, leasing, renting or otherwise exercising control over real or personal
property within the taxing jurisdiction;
(5) As a retailer, who has a physical presence in the State of Colorado, making more
than one (1) retail sale of tangible personal property, products or services within a twelve
(12) month period, where the property or product is delivered by any means, including
other than common carrier, to a location within the City, or the service rendered occurs
within the City; or
(6) Making retail sales sufficient to meet the definitional requirements of economic
nexus as defined in this Article.
. . .
Manufacturing shall mean the operation or performance of an integrated series of operations that
places a product, article, substance, commodity, or other tangible personal property in a form,
composition, or character different from that in which it was acquired, whether for sale or for use
by a qualifying manufacturer. The change in form, composition, or character must result in a
new product, article, substance or commodity that is different from and has a distinct name,
character, or use from the raw or prepared materials.
. . .
Section 9. That effective June 26, 2022, Section 25-73(c) of the Code of the City of
Fort Collins is hereby amended by the deletion of paragraph (10) and all subsequent paragraphs
shall be renumbered accordingly:
Sec. 25-73. Imposition of the sales tax and exemptions.
. . .
(c) Transactions and items exempt from the sales tax. The following shall be exempt from
the sales tax:
. . .
(10) All sales of cigarettes;
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Section 10. That Section 25-73(c) of the Code of the City of Fort Collins is hereby
amended by the addition of a new paragraph (26) which reads in its entirety as follows:
Sec. 25-73. Imposition of the sales tax and exemptions.
. . .
(c) Transactions and items exempt from the sales tax. The following shall be exempt from
the sales tax:
. . .
(26) The disposable bag fee established in Article XIII of Chapter 12 of this Code,
retroactive to May 1, 2022.
Section 11. That effective June 26, 2022, Section 25-74(b) of the Code of the City of
Fort Collins is hereby amended by the deletion of paragraph (17) and all subsequent paragraphs
to be renumbered accordingly:
Sec. 25-74. Imposition of the use tax and exemptions.
. . .
(b) Transactions and items exempt from the use tax. The use, storage, distribution or
consumption in the City of the following are hereby exempted from the use tax:
. . .
(17) Cigarettes;
. . .
Section 12. That Section 25-198(c) of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-198. Compromise and settlement by Financial Officer.
. . .
(c) Whenever a settlement by the Financial Officer results in a compromise of an assessed
amount of two thousand five hundred dollars ($2,500.) ten thousand dollars ($10,000) or more or
for a potential claim the amount of which cannot be reasonably determined, a written settlement
agreement between the City and the taxpayer shall be required as a condition of settlement. The
fully executed settlement agreement shall be retained in the files of Financial Services together
with the Financial Officer's opinion.
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. . .
Section 13. That Section 25-328 of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-328. Payment of tax.
The tax levied by this Division shall be due to the City by the tenth day of each month. Every
telephone utility company subject to this Division shall file a tax return each month with the
Financial Officer on or before the twentieth day of each month for the preceding month and
remit the tax due to the Financial Officer simultaneously therewith.
Section 14. That Section 25-329 of the Code of the City of Fort Collins is hereby
amended to read as follows
Sec. 25-329. Failure to pay.
If any telephone utility company subject to this Division fails to pay any of the taxes due under
this Division on the date that the tax is due, the amount in default shall bear interest at the rate of
ten (10) percent per annum from the date of default of payment interest at the rate of one (1)
percent per month shall be calculated for each month or portion of a month from the due date
that a tax deficiency remains unpaid. The full amount of the tax together with all interest
accruing shall be and is hereby declared to be a debt due and owing from such utility to the City,
which shall be due and collectible from such company by civil action in any court of competent
jurisdiction.
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NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT
COLLINS as follows:
Section 1. That the City Council hereby makes and adopts the determinations and
findings contained in the recitals set forth above.
Section 2. That the City Council hereby appropriates for expenditure from prior year
reserves in the General Fund the sum of ONE HUNDRED EIGHTY-ONE THOUSAND SIX
HUNDRED FORTY-THREE DOLLARS ($181,643) to be expended in the General Fund for
Cultural Development and Programming activities.
Section 3. That the City Council hereby appropriates for expenditure from prior year
reserves in the General Fund the sum of ONE HUNDRED TEN THOUSAND FOUR HUNDRED
SEVENTY-ONE DOLLARS ($110,471) to be expended in the General Fund for Tourism
Programming.
Introduced, considered favorably on first reading, and ordered published this 19th day of
April, A.D. 2022, and to be presented for final passage on the 3rd day of May, A.D. 2022.
____________________________________
Mayor
ATTEST:
_______________________________
City Clerk
Passed and adopted on final reading on 3rd day of May, A.D. 2022.
____________________________________
Mayor
ATTEST:
_______________________________
City Clerk