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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 11/03/2009 - SECOND READING OF ORDINANCE NO. 106, 2009, AMENDIN DATE: November 3, 2009 AGENDA ITEM SUMMARY STAFF: Mike Freeman _ T COLLINS CITY COUNCIL Chuck Seest Second 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. EXECUTIVE SUMMARY This Ordinance, unanimously adopted on First Reading on October 20,2009,eliminates 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 eliminates 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. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. ATTACHMENTS 1. Copy of First Reading Agenda Item Summary-October 20, 2009. (w/o original attachments) ATTACHMENT 1 ITEM NUMBER: 16 AGENDA ITEM SUMMARY DATE: October20, 2009 FORT COLLINS CITY COUNCIL STAFF: Mike Freeman Chuck Seest SUBJECT First Reading of Ordinance No. 1.06',-2009,.Amending=Sectionr25=�23(c) of the City Code Relating to the Vendor Fee for Collecting and Rem'itting'Sal�es Tax. RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading FINANCIAL IMPACT ,�� This Ordinance amends the City�Codle to eh� imi'nate';the.,vendo>� ee paid to merchants who collect City sales and use tax. Eliminlib of the fee will esult in the Qi�y receiving an additional$300,000 per year in sales tax collections.`These collections-wall 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(thre.Ci't 'sf!cuDrent ve�ndoi'fee 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 m�setaxes or fee 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 i. � The vendor fee is a service fee hat�is retain d 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 October 20, 2009 -2- Item No. 16 of paper forms for remitting the sales tax collection. With increasingly automated accounting 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 tok ee p 1%0�($4'5�oft"the-first $4,500 of sales tax collected /I I r 1 V I 1 1 \". d during each reporting period as.a service(fee for ool sec ting thRarx. The fee may be taken only if the return is filed and paid on time -here are�approximately 9,806 active sales tax licenses. Less than 20% of vendors reach the sales vol mu e needed to'lJeep 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 1,00o,000 800,000 600,000 w ry 0 0 400,000 200,000 0 2003 2004 2005 2006 2007 2008 C 0.- Year , October 20, 2009 -3- Item No. 16 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 �9 77�\ -";;T, -77- oil Vendor , Vendor Fee � , `' Vendor 'Vendor Fee �: a W�0 4 T'f{ , Z-, hti m Fee 'Restriction:- � Ci i,Fee 3'�- :Restriction 1 Denver' 0.50% N 10 Centennial 3.00% Y Colorado 2 Springs 2.00% Y 11 Boulder 0.00% N/A Aurora 0.50% _N 12 Greeley 0.00% N/A 4 Lakewood 0.00% N/A 13 Longmont 3.00% Y 5 "`Fort`Collins " ' ' 0.00% N/A 14 Loveland 3.33% Y 6 Westminster 2.50% Y 15 Grand Junction 3.33% N 1 7 Thornton — 3.00% Y �6 Whatridge 0.00% N/A 8 Pueblo 0.00% N/A 1T: Golden 0.00% N/A 1 State of 9 Arvada 3.00% ,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. COP V-A 0 P 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. 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 t 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