Longmont may exempt two state-wide fees on retail deliveries and carryout bags from local businesses from the city's sales and use tax. The city council gave preliminary approval last week to the move and scheduled a public hearing and final vote for Nov.29.
Both fees were created by the 2021 state legislature and have been perceived as creating a "tax on a tax" on purchasers because the sales tax would be applied to the fee, according to a city staff report to the city council. The fees and taxes would be applied to the purchaser and not local businesses. The local business would just be in the role of collecting remitting the tax and fees, said the city's CFO Jim Golden via email.
The fees have attracted negative media attention and several home rule cities have exempted them from their sales taxes.
Under the city's current sales and use tax code, the 3.53% sales tax would apply on top of those new fees, said city spokesman Rigo Leal.
City staff members do not think there is an option to "opt out" from the fees themselves "and that is not at what the city is doing," Leal said.
The staff report says that the amount of tax revenue that would be generated by the additional fees is likely quite minimal and not worth the controversy.
The retail delivery fee was created under SB21-260 as part of an effort to fund improvements to the state’s roads. One of the new revenues was a retail delivery fee of 27 cents on retail deliveries by motor vehicle that “include tangible personal property,” the staff report states.
Any delivery fee is subject to Longmont’s sales tax, which means every delivery fee of 27 cents would be taxed at one cent, the staff report states.
Also, HB21-1162 — called the “Plastic Pollution Reduction Act” — mandated a 10 cent carryout bag fee. The tax on this fee under Longmont’s sales tax code would be 0.35 cents.
The Colorado Municipal League and its Sales Tax Simplification Committee this summer recommended that “it was in the best interest of home rule cities to uniformly pursue an exemption of these two fees,” the staff report states.
CORRECTION: The city is not opting out of the two new fees as a previous version indicated, rather exempting them from the city's sales and use tax code.
