HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/17/2022 - SECOND READING OF ORDINANCE NO. 053, 2022, AMENDIN Agenda Item 2
Item # 2 Page 1
AGENDA ITEM SUMMARY May 17, 2022
City Council
STAFF
Jennifer Poznanovic, Project and Revenue Manager
Ryan Malarky, Legal
SUBJECT
Second Reading of Ordinance No. 053, 2022, Amending Certain Sections of Chapter 25 of the Code of th e
City of Fort Collins Relating to the Imposition, Collection, and Enforcement of the City’s Sales and Use Tax.
EXECUTIVE SUMMARY
This Ordinance, unanimously adopted on First Reading on May 3, 2022, amends 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 rec ently adopted
disposable bag fee, and removing the tax exemption for cigarettes.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on Second Reading.
ATTACHMENTS
1. First Reading Agenda Item Summary, May 3, 2022 (w/o attachments) (PDF)
2. Ordinance No. 053, 2022 (PDF)
Agenda Item 12
Item # 12 Page 1
AGENDA ITEM SUMMARY May 3, 2022
City Council
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 disposable 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 flexibility 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 is
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 added 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 administration 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.
ATTACHMENT 1
COPY
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 Section 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 Section 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 shareback. 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
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 practice 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. COPY
Agenda Item 12
Item # 12 Page 3
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 recommends 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. COPY
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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 Ordinance 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 City 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 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.
The following words, terms and phrases, when used in this Division, shall have the meanings
ascribed to them in this Section:
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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, children by birth or adoption, step children, foster
children, children under legal guardianship, and any other person for whom the applicant provides
a majority of the person’s support for the period during which a rebate is sought. Unrelated persons
who reside at the same physical address and are financially independent of each other may
individually apply and each qualify as a household. The City's determination shall be final with
regard to eligibility as a household.
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, an
application must be filed with the City, and shall be for the rebate of the taxes imposed and paid
on food 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.
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 amended,
during the entirety of the 12-month period for which the rebate is sought. The applicant's household
shall have a total annual income that 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 for the 12-month period in which the tax to be rebated was imposed.
Section 5. That Section 25-51 of the Code of the City of Fort Collins is hereby
amended to read as follows:
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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.
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 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. 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 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 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 produce 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:
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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;
(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 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:
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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:
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 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.
. . .
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.
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
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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, 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.
Introduced, considered favorably on first reading, and ordered published this 3rd day of
May, A.D. 2022, and to be presented for final passage on the 17th day of May, A.D. 2022.
____________________________________
Mayor
ATTEST:
_____________________________
City Clerk
Passed and adopted on final reading on this 17th day of May, A.D. 2022.
____________________________________
Mayor
ATTEST:
_____________________________
City Clerk