Tax & Accounting Blog

Woodland Park Passes Sales Tax Increase

Indirect Tax, ONESOURCE April 7, 2016

On April 5th the citizens of Woodland Park, Colorado voted to raise their sales tax rate an additional 1.09 percent effective July 1. The picturesque city located near Colorado Springs and the Rocky Mountains derives much of its economic output from tourism. While a sales tax increase in a town of 8,000 might not seem like the kind of breaking news we generally cover, it is indicative of the complexity of Colorado’s local sales tax system. Colorado’s constitution authorizes ‘home rule’ for cities and towns with populations over 2,000 people. Colo. Constitution Art. XX § 6. Home rule jurisdictions are authorized to collect and administer their own sales and use taxes. They can also control their own tax base and create their own statutory and administrative definitions. Seventy cities with home rule charters have elected to enact and administer their own sales taxes. Colorado Sales/Use Tax Rates DR 1002 (12/23/15).

Home rule jurisdictions can contract with the Department of Revenue to have the Department collect and administer their taxes, but can also then subsequently decide to self-administer. The home rule jurisdictions do not have to schedule the effective dates of sales tax changes semi-annually like those administered by the Colorado Department of Revenue and thus can change unexpectedly for those unaware of the home rule powers. The Department of Revenue studied the impact of home rule on the comparative sales tax bases and in one example found that 34 exemptions present in the State’s sales and use tax were not present in the city of Westminster. Uniform Sales and Use Tax Base Throughout the State, 12/01/2013. Exemptions vary from home rule jurisdiction to home rule jurisdictions and may change from time to time. Thus a seemingly simple sales tax rate change in Woodland Park illustrates the complexity of compliance in a state with home rule.