HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 10/20/2009 - FIRST READING OF ORDINANCE NO. 106, 2009, AMENDING ITEM NUMBER: 16
AGENDA ITEM SUMMARY DATE: October 20, 2009
FORT COLLINS CITY COUNCIL STAFF: Mike Freeman
Chuck Seest
SUBJECT
First Reading of Ordinance No. 106, 2009,Amending Section 25-123(c)of the City Code Relating
to the Vendor Fee for Collecting and Remitting Sales Tax.
RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading
FINANCIAL IMPACT
This Ordinance amends the City Code to eliminate the vendor fee paid to merchants who collect
City sales and use tax. Elimination of the fee will result in the City receiving an additional $300,000
per year in sales tax collections. These collections will be an ongoing revenue source.
The 2010-11 Budget that will be considered on First Reading on October 20, 2009, includes the
assumption that this change to the vendor fee will be adopted. The additional $300,000 per year in
revenue is being appropriated in the budget ordinance.
EXECUTIVE SUMMARY
This ordinance will eliminate the City's current vendor fee for sales and use tax licensees. The
proposed modification will result in $300,000 of ongoing additional revenue being available for
General Fund uses. This change will not increase taxes or fees charged, but rather eliminate the
amount of City sales and use taxes that vendors are allowed to retain in exchange for the service they
provide in collecting City taxes. Currently,vendors are allowed to retain 1% of sales and use taxes
collected, up to a maximum of$45 per reporting period.
BACKGROUND
History
The vendor fee is a service fee that is retained by sales tax licensees in recognition of their work in
collecting the City's sales and use taxes. The fee was originally established to acknowledge that
merchants incurred a cost for collecting sales taxes, including accounting work and the completion
of paper forms for remitting the sales tax collection. With increasingly automated accounting
October 20, 2009 -2- Item No. 16
processes, the cost incurred by vendors has greatly diminished as their "point of sale" software
makes these calculations for the vendor.
In the past, the vendor fee has been paid at different rates. The original vendor fee of 3% with no
cap was first changed in 1989. The 1989 change limited vendors to 3% of the first $3,000 in sales
tax they collected,plus 1%of all taxes thereafter. The vendor fee was further reduced in April 2004
to the current formula with a cap of$90 per reporting period.
The current vendor fee allows licensees to keep 1% ($45) of the first $4,500 of sales tax collected
during each reporting period as a service fee for collecting the tax. The fee may be taken only if the
return is filed and paid on time. There are approximately 9,800 active sales tax licenses. Less than
20% of vendors reach the sales volume needed to keep the full vendor fee each month.
Over time, the changes in the vendor fee have resulted in businesses retaining a smaller amount of
City sales and use tax as a service fee. .At this point, there is no further adjustment that would be
feasible; rather, the vendor fee should be eliminated. The following chart illustrates the history of
the vendor fee taken by businesses:
Vendor Fees Paid to Licensees 2001-2006
1,000,000
800,000 —
600,000 —
N
N
O
O
400,000
200,000
0
2003 2004 2005 2006 2007 2008
Year
October 20, 2009 -3 Item No. 16
J
Comparison of Proposal to Other Municipalities
In reviewing the proposed vendor fees of other regional municipalities,elimination of the fee in Fort
Collins would be consistent with a growing trend. Others have retained the vendor fee,but several
neighboring communities (including the State of Colorado as of this year) pay no fee to vendors.
The chart shows the vendor fees of comparable cities compared to the recommended vendor fee for
Fort Collins.
Comparative Vendor Fees
'Vendor,:
Vendor Fee Vendor VendorFee
EntityFee Restriction city Fee': Restriction••
1 Denver* 0.50% N 10 Centennial 3.00% Y
Colorado
Springs 2.00% Y 1.1 Boulder 0.00% N/A_
3 Aurora 0.50% N 12 Greeley 0.00% N/A
a_ Lakewood 0.00% N/A 13 Longmont 3.00% Y
5 Fort Collins 0.00% N/A _ 14 Loveland 3.33% . Y
6 Westminster. I 2.50% Y 15 Grand Junction 3.33% � N
1
7 Thornton- 3.00% Y 6 Wheatridge 0.00% N/A_
8 Pueblo 0.00% N/A 17 Golden 0.00% ' N/A
1 state of
9 Arvada 3.00% i Y 8 Colorado 0.00% N/A
Denver's 2010 budget letter indicates the .5% vendor's incentive fee
for sales and lodger's tax returns will be eliminated.
Effective 1/1/2010, Thornton is reducing the vendor fee cap from $150 to $25.
ORDINANCE NO. 106, 2009
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AMENDING SECTION 25 - 123 (c)
OF THE CODE OF THE CITY OF FORT COLLINS
RELATING TO THE VENDOR FEE
FOR COLLECTING AND REMITTING SALES TAX
WHEREAS , Section 25 - 123 (c) of the City Code authorizes retailers to retain one percent
of the first $4500 of the amount of sales tax they collect for the City (the "Vendor' s Fee") ; and
WHEREAS , the Vendor' s Fee was originally adopted in recognition of the time and
effort expended by retailers to collect the City ' s sales tax from their customers ; and
WHEREAS , current business practices include automated accounting processes that have
significantly reduced the time retailers need to invest in collecting the City' s sales tax; and
WHEREAS , the total amount currently retained by retailers is approximately $ 300,000
per year; and
WHEREAS , the loss of this amount of sales tax revenues has a significant negative effect
on the City and its citizens given the recent budget constraints; and
WHEREAS , the City Council believes it to be in the best interests of the City to
eliminate the Vendor' s Fee and to utilize the resulting savings to help defray City expenses.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows :
Section 1 . That Section 25 - 123 (c) of the City Code is hereby amended to read as
follows :
Sec. 25-123 . Remittance of sales tax collected by retailer.
(c) Every retailer 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. Every rctailer in
Section 2 . That this Ordinance shall become effective on January 1 , 2010 .
Introduced, considered favorably on first reading, and ordered published this 20th day of
October, A.D . 2009, and to be presented for final passage on the 3rd day of November, A.D .
2009 ,
Mayor
ATTEST :
City Clerk
Passed and adopted on final reading on the 3rd day of November, A.D . 2009 .
Mayor
ATTEST :
City Clerk