Niwot LID hears from sales tax officials

Though many local businesses have reported lower earnings in 2019, year-to-date sales tax collections in the Niwot Local Improvement District are outpacing 2018 by nearly seven percent. To help explain the apparent contradiction and other district tax conundrums, the advisory committee invited LuAnn Pyatt of the Colorado Department of Revenue and Dave Thayer of Boulder County Financial Services to their monthly meeting on Nov. 5 for a discussion of how sales taxes are collected and distributed.

According to Pyatt, some growth is likely due to new state policies concerning sales tax collections. Late last year, the Department of Revenue enacted emergency regulations that required out-of-state retailers with a “substantial nexus” in Colorado to collect and remit local sales taxes beginning on December 1, 2018. They also required online retailers to collect taxes based on the customer’s address, rather than their common taxing districts. Those temporary measures were later formalized into House Bill 1240, which passed with a clear majority of both the Colorado house and senate in April, and went into effect on June 1, 2019.

“Basically, it was to codify our rules about point of delivery for taxation, so if someone is shipping to the area, then they need to collect that area’s tax,” she said. “We call it the ‘Wayfair Decision’ for the out-of-state people having to collect local taxes and destination sourcing for in-state.”

Pyatt speculates that this has boosted LID revenues as online retailers such as Amazon, the aforementioned Wayfair, and others start complying with the stricter rules, and realize they should be collecting and remitting taxes for even small localities.

“We have actively worked with a lot of those [online sellers] already, just because they often had a lot of questions about what they were doing. Really, though, they’ve done their homework, and we have really supplied those guys with maps, addresses, and things like that, so they’re pretty prepared to pull the right tax.”

Blair estimated that online transactions comprise up to five percent of Boulder County’s taxable sales, which he termed “a pretty decent contribution.”

Still, Pyatt warned that “sales tax is volatile,” and it may be a few months before Niwot LID collections level off into a more stable pattern. Retailers have up to three years to claim a refund if they’ve paid a tax in error, “so you could see some of it trail off.” Additionally, new regulations concerning “marketplace facilitators” and third-party sellers went into effect in October, but the resulting revenues won’t be reported until December. There may also be changes to revenue flow when updates to CDORs online filing and GIS systems come online next summer.

Pyatt and Blair were able to shed light on some other lingering questions from board members, including whether businesses in the LID should pay use tax (no). On others, such as the impact of Niwot’s retail marijuana dispensary, the two deferred due to confidentiality and taxpayer privacy laws.

Following the sales tax discussion, LID treasurer Bruce Rabeler presented the monthly treasurer’s report, starting with the August 2019 revenue report showing the 6.6% year to year increase (to $130,547, up from $122,482 in August 2019). He noted that the most significant growth had been in the retail sector, while food service/accommodation sector was “exactly flat.”

On the expense side, the LID has approved $126,086.79 in spending through October, leaving $6,767.21 in the budget. However, after approving the month’s only funding request for first half of 2019 ED, there will be a budget deficit of $5,732. The bulk of spending (~70%) has gone toward marketing/advertising, followed by events (20%) and maintenance (10%).

Up next was Catherine McHale, appearing for the NBA, who requested $12,500 to pay the Economic Development Director’s salary for the first half on 2019. In June, the LID funded the same amount for the EDD’s second half of the year, without realizing that the first half expense had been overlooked after changes to the county’s financial system. The request was approved unanimously.

There was no new business. In old business, the committee briefly discussed efforts to preserve the Native American tree carvings, but no action was taken.

The LID advisory committee will hold its next monthly meeting on Tuesday, Dec. 3 at the Mountain View Fire Station.