Sales tax numbers rebound in 2000

Something funny happened with sales tax licenses between the end of the 20th Century and the dawn of the 21st.

As fall gave way to winter in 1999, the number of registrations for new sales tax accounts in Northern Colorado started dropping lower and lower, hitting a total of 264 in December.

With the holidays and Y2K safely behind, numbers seem to have recovered, but economists have been watching the scenario closely.

Greeley Department of Finance officials saw only 18 registrations in the final month of 1999, while their Fort Collins counterparts showed 79 registrations in November and then 104 in December.

Larimer County figures show that sales tax registration dropped from 230 in October to 178 in December. In Weld County, registrations went from 201 to 112 during the same period.

Then when 2000 rolled around, suddenly the sales tax licenses bounced back with a vengeance, all but erasing the dip that ended the 20th Century. “I saw (the drop) last year,´ said regional economist John Green, “and I thought, ‘Uh-oh, the economy’s getting weak.’

Green said he thought the three-point increases in the interest rate had finally taken their toll and slowed everything down.

“But then we have this huge bounce-back.”

In Greeley, there were 52 registrations for sales-tax licenses in January. The next month, there were 31. March and April had 42 and 28 respectively. In Fort Collins, sales-tax registrations got off to a slower start, with 82 in January, but then took a big jump with 104 in February, 143 in March and 107 in April.

Combined numbers for Larimer and Weld counties in the first quarter of 2000, show a total of 594 registrations in January, 490 in February and 525 in March. The second quarter remains just as strong, with 442 registrations in April and 530 in May.

So what happened? What caused business owners to wait for 2000 before getting their sales-tax licenses?

One factor is that since the retail and service industries constitute a huge slice of the economy in Northern Colorado, it doesn’t make sense to try and get such a business off the ground late in the fourth quarter. It takes time to get permits and clear bureaucratic hurdles, and Christmas is right around the corner.

Green, however, thinks something else might have been at work. The dip was much more pronounced than previous such patterns.

“It’s like people took a look at interest-rate hikes and said, ‘This is risky business. Housing starts are down. People are not as optimistic about the economy. I’m not sure I want to start just yet.'”

Then came the Christmas sales. Christmas sales were much better than average in 1999, and Green thinks they may have encouraged prospective business owners to get moving.

“It’s like they all decided to jump in the pool at the same time,” he said. “We recovered three-quarters of the weakness in sales tax licenses that we lost at the end of ’99.”

That brings up the second factor. Y2K may be a memory that produces snickers now, but it wasn’t too long ago that people were quietly buying one-year food supplies and stores were selling portable generators for high prices, under ‘no returns’ policies. Green thinks a lot of people were waiting to see if the lights would indeed go out when the millennium rolled over.

“I really think apprehension over Y2K explains a lot of this,´ said Green. “When it blew over, then everything let go. Why should people risk their money and savings when they can wait a little longer?”

There could have been other factors at work as well.

“I think some of it might have been the inspection requirement,´ said Anne Drobnitch, an accountant with Greeley’s finance department.

Greeley, said Drobnitch, has a lot of older buildings.

“Before you can get a sales tax license, you have to get an inspection,” she said.

Because those inspections take time, usually a few weeks, they can warp the numbers a bit. People may have intended to get a sales tax license in December, but the inspection process could have held up the license into January.

Business owners may also have a close eye on the bottom line, Drobnitch said: In odd-numbered years, the state issues licenses for one year. In even-numbered years, they may issue them for two years.

“The state charges $16 for two-year licenses,” she said. “In July the fee drops to $12 because you don’t have it as long. In January 2001, the fee will only be $8 because it’s only good for one year, and it’s $4 in July. Maybe some people wanted to wait and get a two-year license.”

on Facebook on LinkedIn