HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/18/2010 - ITEMS RELATING TO SALES, USE AND LODGING TAX DATE: May 18, 2010
STAFF: Chuck Seest • • •
Items Relating to Sales, Use and Lodging Tax.
A. Second Reading of Ordinance No. 054, 2010,Amending Chapter 25, Article III of the City Code Concerning
Sales and Use Tax.
B. Second Reading of Ordinance No. 055, 2010, Amending Section 25-252 of the City Code Relating to the
Vendor Fee for Collecting and Remitting Lodging Tax.
EXECUTIVE SUMMARY
Ordinance No.054,2010,modifies City Code to allow for use of a certified electronic address database for determining
whether or not a customer is in the City, and simplifies tax collection regarding definitions, waivers, and notice.
Ordinance No. 055, 2010, eliminates the City's current vendor fee for lodging tax licensees. Both Ordinances were
unanimously adopted on First Reading on May 4, 2010.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on Second Reading.
ATTACHMENTS
1. Copy of First Reading Agenda Item Summary-May 4, 2010
(w/o attachments)
ATTACHMENT
DATE: May 4, 2010 AGENDA ITEM SUMMARY
STAFF: Chuck Seest FORT COLLINSCOUNCIL
Items Relating to Sales, Use and Lodging Tax.
A. First Reading of Ordinance No.054,2010,Amending Chapter25,Article III of the City Code Concerning Sales
and Use Tax.
B. First Reading of Ordinance No.055,201UAmendiFn-25-252.of the City Code Relating to the Vendor
Fee for Collecting and Remitting Lodgin
EXECUTIVE SUMMARY
Ordinance No.054,2010,modifies City Code to allow for use of certified electronic address database for determining
whether or not a customer is in the City, and it simplifies tax collection regarding definitions, waivers, and notice.
Ordinance No. 055, 2010, will eliminate the City's current vendor fee for lodging tax licensees. The proposed
modification will result in approximately $25,000 of ongoing additional revenue available for the promotion of
convention and visitor activities and for cultural development and programming services. This change will not increase
taxes or fees charged, but rather eliminate the amount of City lodging taxes that vendors are allowed to retain in
exchange for the service they provide in collecting City taxes. Currently, vendors are allowed to retain 3% of the
lodging tax collected.
BACKGROUND / DISCUSSIONS ,
A. Ordinance No.054,2010 Amending Chapter 25,Article III of the City Code Concerning Sales and Use
Tax.
The amendment to Section 25-123 allows the businesses(taxpayers)that rely on the certified database to be"held
harmless"in a future audit if they did not collect the City of Fort Collins sales tax due to an error in the address locator
database. The Ordinance encourages the use of the database, which provides retailers with great accuracy as to
which municipality they are making deliveries. Presently,some retailers are often unaware of where a delivery address
is located,and City of Fort Collins taxis often not collected. For example,ABC sells a couch to a customer with a Fort
Collins address. ABC enters the address into one of the two databases and it indicates what tax rate should be
collected. The rate is determined by whet�herjor not th�addfess is I co ated in the city limits of Fort Collins.
E� �( �'1 Irk Ys
The City of Fort Collins Management Information Services departmeurrently working with the twodatabase
companies to confirm the accuracy of their_data. The two companies at American Spatial Solutions and Group
1 Software (part of Pitney Bowes).
In addition to the State of Colorado,the home rule cities that have adopted similar provisions in their tax codes include
Arvada,Aurora,Boulder,Brighton,Denver,Longmont,Loveland,Northglenn,Silverthorne,Westminster,Wheat Ridge,
and Woodland Park. The Colorado Municipal League is a proponent of the databases and has urged municipalities
to adopt a sales and use tax locator/hold-harmless ordinance (Attachment 1).
The remaining portion of the Ordinance addresses areas of confusion in the Code regarding definitions,waivers, and
notice.
• The definition of drugs dispensed in accd`r`dancepp with been clarified.
• Section 25-186 has been clarified to indicate notices of assessment should be sent via first class mail or
certified mail.
• Section 25-225 has clarified the statute of limitations ruling with regard to audits.
May 4, 2010 -2- ITEM 15
B. Ordinance No. 055, 2010, Amending Section 25-252 of the City Code Relating to the Vendor Fee for
.Collecting and Remitting Lodging Tax
The vendorfee is a service fee that is retained by sales tax licensees in recognition oftheirwork in collecting the City's
sales and use taxes. The fee was originally established to acknowledge that merchants incurred a cost for collecting
lodging taxes, including accounting work and the completion of paper forms for remitting the lodging 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. On November 3, 2009, Council adopted an ordinance to
eliminate the vendor fee for sales and use tax licensees.
The current vendor fee for lodging tax licensees alrows:l c�ensees;o keep 3° of the lodging tax collected during each
reporting period as a service fee for collecting the ;ax.The fee maybe taken�only if the return is filed and paid on time.
There are 23 active lodging tax licenses. This 6rrddiinancce eliiminates the vendor fee for lodging tax licensees.
This change has been discussed with ftm Clark,'Exec'utive1 Director of-the Fort Collins' Convention and Visitors'
Bureau. Mr. Clark agreed the change was consistent with elimination of the broader vendor fee that applied to sales
and use tax collections.
FINANCIAL IMPACT
Ordinance No. 054, 2010 does not have any immediate financial impacts. As updates need to be made to the
database to reflect future annexations to the City boundary, the Finance Department will coordinate with the City's
Management Information Systems Departmentto�validate th'"bcuAacy(ofthe�d"atabase. This will ensure that vendors
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relying upon these databases are calculating the appropriate tasFand collecting the appropriate amount on the behalf
of the City. ��
Ordinance No.055,2010 amends the City Code to eliminate the vendor fee paid to merchants who collect City lodging
tax. Elimination of the fee will result in approximately $25,000 of ongoing additional revenue.available for the
promotion of convention and visitor activities and for cultural development and programming services.
SUSTAINABILITY: ECONOMIC, ENVIRONMENTAL AND SOCIAL IMPACTS
The economic impact of Ordinance No. 054, 2010 would be that vendors would be able to collect the appropriate tax
at the time of sale rather than when an audit is performed. The City would be receiving the monies in a more timely
manner.
The economic impact of Ordinance No. 055, 2010 would be additional funds would be available for use in promoting
convention and visitor activities which Ultimately could increase tourismjand spending in the City.
STAFF RECOMMENDATION
Staff recommends adoption of these Ordinances on First Reading.
ATTACHMENTS
1. Memo from the Colorado Mu n opal L�ag�
ORDINANCE NO. 054, 2010
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AMENDING CHAPTER 25, ARTICLE III OF THE CODE OF THE
CITY OF FORT COLLINS CONCERNING SALES AND USE TAX
WHEREAS, under Article V, Section 22 of the City Charter, the Financial Officer is
responsible for collecting, receiving and disbursing all money belonging to the City; and
WHEREAS, in the past three years initiatives have been undertaken at the state level to
simplify tax collection in the State; and
WHEREAS, in the past several years City staff has identified several areas of confusion in
the Code regarding definitions, waivers, and notice; and
WHEREAS,the Financial Officer and the City Manager recommend that the City Code be
amended to allow for more simplified tax collection; and
WHEREAS,the City Council wishes to accept the recommendations of the Financial Officer
and the City Manager and adopt an ordinance to that effect.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT
COLLINS, as follows
Section 1. That the definition "Drugs dispensed in accordance with a prescription"
contained in Section 25-71 of the Code of the City of Fort Collins is hereby amended to read as
follows:
See. 25-71. Definitions.
Drugs dispensed in accordance with a prescription shall mean drugs dispensed
in accordance with any order in writing, dated and signed by a licensed practitioner
of medicine, dentistry, optometry, or podiatry, or given orally by such practitioner,
and immediately reduced to writing, specifying the name and address of the person
for whom the medicine,drug or poison is offered and directions, if any,to be placed
on the label.
Section 2. That Section 25-123 of the Code of the City of Fort Collins is hereby amended
by the addition of new subparagraphs (f) and (g) which read in their entirety as follows:
Sec. 25-123. Remittance of sales tax collected by retailer.
(f) Any retailer that collects and remits sales tax to the Financial Officer as
provided in this Article may use an electronic database of state addresses that is
certified by the State Department of Revenue pursuant to § 39-26-105.3, C.R.S., to
determine the jurisdictions to which tax is owed.
(g) Any retailer that uses the data contained in an electronic database certified
by the State Department of Revenue pursuant to § 39-26-105.3,C.R.S.,to determine
the jurisdictions to which tax is owed shall be held harmless for any tax, penalty, or
interest owed the City that otherwise would be due solely as a result of an error in the
electronic database, provided that the retailer demonstrates that it used the most
current information available in such electronic database on the date that the sale
occurred. Each retailer shall keep and preserve such records as prescribed by the
Financial Officer to demonstrate that it used the most current information available
in the electronic database on the date that the sale occurred. Notwithstanding the
above, if the error in collecting and remitting is a result of a deceptive or false
representation or fraud, the provisions of this Sectionrshall not apply.
Section 3. That Section 25-186(b)of the Code of the City of Fort Collins is hereby amended
to read as follows:
Sec. 25-186. Failure to make return; estimate of taxes; notices; appeal; audit.
(b)The Financial Officer shall serve upon the delinquent taxpayer personally or
by first class mail,or certified mail,directed to the last address of the taxpayer on file
with the City written notice of such estimated taxes,penalty and interest. Such notice
shall constitute a notice of determination, assessment and demand for payment and
shall be due and payable within twenty(20) days from the date the notice is mailed.
Section 4. That Section 25-225(d) of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 25-225. Limitations on actions to collect.
(d) Before the expiration of such period of limitation, the taxpayer and the
Financial Officer may agree in writing to an extension thereof, and the period so
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agreed on may be extended by subsequent agreements in writing made before the
expiration of the previously agreed upon time. The ability to complete an audit will
not lapse, once the taxpayer has been notified of the audit period, until thirty (30)
days after the date of the notice of determination, assessment and demand for
payment issued as a result of such audit.
Introduced,considered favorably on first reading,and ordered published this 4th day of May,
A.D. 2010, and to be presented for final passage on the 18th dayofmay, A.D. 2010.
May
ATTEST:
City Clerk
Passed and adopted on final reading on the 18th day of May, A.D. 2010.
Mayor
ATTEST:
City Clerk
-3-
ORDINANCE NO. 055, 2010
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AMENDING SECTION 25-252 OF THE CODE OF THE CITY OF FORT COLLINS
RELATING TO THE VENDOR FEE FOR COLLECTING AND
REMITTING LODGING TAX
WHEREAS, Sections 25-252(a), (e), and (0 of the City Code authorize lodging providers
to retain three percent of the amount of lodging 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 lodging providers to collect the City's lodging tax from their customers; and
WHEREAS, current business practices include automated accounting processes that have
significantly reduced the time lodging providers need to invest in collecting the City's lodging
tax; and
WHEREAS, the total amount currently retained by lodging providers is approximately
$25,000 per year; and
WHEREAS, the loss of this amount of lodging tax revenues has a negative effect on the
City and its citizens given the recent budget constraints; and
WHEREAS, the City incurs an administrative expense of approximately $5,000 per year
associated with monitoring the Vendor's Fee and eliminating the Vendor's Fee would eliminate
that expense; 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 Sections 25-252(a), (e), and (0 of the City Code are hereby amended
to read as follows:
Sec. 25-252. Payment of tax.
(a) Every lodging provider shall be liable and responsible for the payment of
an amount equal to three (3) percent of all proceeds derived from the providing of
lodging accommodations as established pursuant to § 25-242 and any such
lodging provider shall file a return each month with the Financial Officer on or
before the twentieth day of each month for the preceding month and remit any
amount equivalent to the lodging tax collected to the Financial Officer.
(e) No person other than the City may take enrichment from the collection or
payment of such tax or from liability for payment of the full amount of the tax as
levied by § 25-242 .
Section 2. That this Ordinance shall become effective on July 1, 2010.
Introduced, considered favorably on first reading, and ordered published this 4th day of
May, A.D..2010, and to be presented for final passage o4the;1ay of May, A.D. 2010.
4
May
ATTEST:
40ul
City Clerk
Passed and adopted on final reading on the 18th day of May, A.D. 2010.
Mayor
ATTEST:
City Clerk