Commissioner explains use-tax issue
Based on the following excerpt from an El Paso County press release, the Westside Pioneer followed up with a question (which appears a few paragraphs down). That in turn prompted a response from County Commissioner Chairman Jim Bensberg.
Despite a 34 percent year to year reduction in the construction of new single family homes and a 49 percent reduction in commercial construction, the amount of money El Paso County has collected in the form of use tax on building materials has more than doubled. The increase results from an overhaul of the use tax collection process. Since April 1, use taxes on building materials have been collected when a building permit is issued using a formula that assumes 40 percent of the value of a given commercial, residential or other building project is in materials. For the first six months of this year the county has collected use taxes on building materials totaling $1,024,794 compared to only $314,253 for the same period last year. The data indicates another $1 million will be collected when current projects are completed.
Question from Westside Pioneer: We see the county’s standpoint that use tax collections are more consistent now, but what about the aspect that at a time when the construction industry is ailing, the county is extracting even more money in taxes from that area than before?
Answer from Board of County Commissioners Chairman Jim Bensberg, (who also serves on the Regional Building Commission): While El Paso county’s new process for collecting the use tax due on building materials is on track to double the total amount collected in that category last year, it is not a new tax on contractors and does not place any additional burden on struggling businesses during this recession. The 1 percent sales and use tax has been in effect since it was passed by El Paso County voters in 1987.
The new process offers contractors three options:
Pay the 1 percent use tax at the time a building permit is issued based on a formula which estimates the value of materials and supplies at 40 percent of the total declared value of the project. It is noteworthy that other jurisdictions which use this type of formula value materials and supplies at 50 percent of the declared value of the project. But El Paso County chose the lower 40 percent valuation because the building industry would not support any more than that. Since implementing this new process in April, this option, which was previously unavailable, has been the top choice for contractors because it reduces their paperwork burden and saves them time and money.
Pay 1 percent sales tax at the cash register at the time all purchases for materials and supplies are made. Keep those receipts and provide an accounting of all materials and supplies purchased along with sales taxes paid for each project prior to receiving a certificate of occupancy from Regional Building.
Don't pay sales tax at the cash register but do keep all receipts for materials and supplies for each project, fill out the appropriate forms, provide an accurate accounting of all materials and supplies and pay the 1 percent use tax prior to receiving a certificate of occupancy from Regional Building.
What the new process eliminates is the practice of buying materials out of state and shipping them to the job site thus avoiding the payment of the appropriate amount of use tax. El Paso County has no way of knowing exactly how widespread this practice may have been. Worse yet, the old process, with its ineffective patchwork of city and state collections and accounting has put reputable contractors who buy their materials locally at a competitive disadvantage. By changing the way use tax is paid, the playing field is now level.
In conclusion, the new process for collecting use tax is a huge improvement in transparency and accountability and is far less likely to encourage cheating. Just ask Fremont County - they charge 1.5 percent tax on building materials. And, it's on 50 percent of the project's value.
Compiled by the Westside Pioneer