The city of Longmont is simplifying sales and use tax collections and is ready to join a statewide portal that would help it receive more revenue from internet sales.
City council will vote on the changes next month through one or more ordinances. Council appeared to back the revisions during a work session Tuesday.
Jim Golden, the city’s chief financial officer, told council the city also is switching to a new sales and use tax software system that should be more efficient and lead to better reporting of sales tax activity.
In all, the proposed moves likely will lead to more revenue from internet sales in the city, Golden said.
The city already gets about $2 million annually in sales tax from Amazon and other big retailers, he said, and through five months of 2020, internet sales are up over 33% in Longmont.
“It is impossible to estimate the revenue impact but to this point that activity has all been based on voluntary compliance or businesses with a physical nexus,” according to Golden’s report to council. “These changes should result in increased sales activity collections.”
Councilmember Polly Christensen said she supports the proposals because they would provide Longmont with more revenue while evening the playing field for traditional stores that compete with online retailers.
“The states are losing piles of money in uncollected sales taxes and small businesses, including brick-and-mortar shops, are at a huge disadvantage competing with internet companies that are not sharing sales taxes,” Christensen said.
Longmont is one of 72 home-rule cities in Colorado that self-collect their local sales tax and many of them have their own local tax sales tax base, Golden told council. Businesses operating throughout many of the home-rule cities are required to have multiple licenses, and be aware of multiple tax bases and multiple tax rates.
They also are required to file returns with the state and in each of the home-rule cities where taxes are self-collected, Golden said.
The complex system led home-rule cities to work with the state to simplify the taxation process, he said. That included an update on definitions of tax practices to make them standard across municipalities that self-collect sales taxes.
Colorado cities, in making changes to sales tax collections, also were influenced by the June 2018 decision by the U.S. Supreme Court against Wayfair Inc., which supported imposing online sales taxes across state lines, Golden said.
The Colorado Department of Revenue in 2018 enacted the Emergency Sales Tax “sourcing rule,” which treats both in-state retailers and out-of-state retailers the same, according to the city.
But rather than apply the sourcing rule themselves, home-rule cities backed the creation of a central online portal. The portal would allow businesses with a physical presence outside the city or state to create one account. They could then file and remit sales taxes for different jurisdictions in Colorado in one place at one time using one payment, Golden said.
The portal would make filing taxes in Colorado much easier and less of a burden and it fits legal requirements, including those set out in the Wayfair decision, Golden said.
The portal would include a GIS location database that lists taxing jurisdiction rates by a specific address, allowing businesses to use that information when charging a tax to a delivery location.
One of the ordinances Longmont will be considering in early August will allow the city to adopt the single point of remittance portal developed by the Colorado Department of Revenue. Another ordinance will ask city council to change the sales and use tax code to include standardized definitions, Golden said.
