Construction use-tax process revised

BOULDER – Starting today, contractors and homeowners acting as their own contractor in the city of Boulder must reconcile the prepayment of estimated construction use taxes within 90 days of project completion for projects valued at $20,000 or more.

In September, the city claimed that between June 1, 2006 and June 30 2009 roughly 1,000 contractors had underpaid construction use taxes totaling between $1.9 million and $5.2 million, and officials intended to collect it. They’ve since changed their minds.

That new city requirement comes after Boulder officials spent the previous nine months reviewing the city’s building permit and construction use-tax practices following an outcry from area contractors who received letters notifying them of the city’s initial demands.

SPONSORED CONTENT

Business Cares: April 2024

In Colorado, 1 in 3 women, 1 in 3 men and 1 in 2 transgender individuals will experience an attempted or completed sexual assault in their lifetime. During April, we recognize Sexual Assault Awareness Month with the hopes of increasing conversations about this very important issue.

“Boulder values its business community,” Jane Brautigam, Boulder’s city manager, said in a statement. “We wanted to clarify and streamline the process so our contractors have a clear understanding of our process and the tax obligations.”

Under the new requirement, contractors will have 90 days, instead of 60 days, after project completion to reconcile permits issued after July 1, 2010 when the final contract price or project cost is $20,000 or more. If the cost is less than $20,000 no reconciliation is required.

Since 2002, contractors were paying construction use taxes based on a city-recommended valuation of 50 percent of the property.

That takes into account that half of the project involves materials – which are taxed at 3.41 percent – and half of the project is labor, which is not taxed by the city. Boulder has a table to estimate the tax based on size and building type.

The city’s previous tax-estimate formula didn’t account for economic changes, which led to the underpayments. Increasing commodity and building material costs helped throw off the estimates.

If a contractor used the city’s tax-estimate formula, it calculated building materials at 50 percent of total valuation, when the building materials had become a much larger percent of the project valuation.

Other changes the city is making to the process include:

Permits issued for projects with a final contract price or final project cost less than $20,000 don’t need to be reconciled and will not be audited.

Presenting proposed code changes to City Council (slated for first reading July 20).

The city will implement and maintain ongoing interdepartmental training; and the city will establish routine education and outreach.

The outreach to contractors includes:

Postcards with information about the July 1 reconciliation requirements were mailed on June 30 to all contractors licensed to do business in the city of Boulder.

The Planning and Development Services Center has a banner in place to alert customers to important tax information.

At the time of issuance, permit packets include information about reconciliation requirements and direct the customer to the Construction Use Tax web page.

Contractors may register to receive e-mail updates on the city’s Construction Use Tax process.