2010 – Boulder’s back-taxes faux pas resolved

BOULDER — A dispute between contractors and the city over back taxes ended in July 2010 after months of confusion and grumbling.

The issue arose in September 2009, when the city claimed that between June 1, 2006, and June 30, 2009, approximately 1,000 contractors had underpaid construction use taxes totaling between $1.9 million and $5.2 million. City officials said they intended to collect it.

The underpayments occurred because the formula the city recommended contractors used to estimate the tax was flawed. It assumed building materials would be 50 percent of a project’s value, when changing economic conditions drove up the cost of materials and made them much more expensive.

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Construction materials are taxed at 3.41 percent.

The effort led to outcry from area contractors who received letters notifying them of the city’s initial demands, and city officials spent nine months reviewing the city’s building permit and construction use-tax practices.

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

In July, city officials changed their minds about collecting what was owed.

The city instead adopted a policy requiring contractors and homeowners acting as their own contractors to reconcile the prepayment of estimated construction use taxes within 90 days of project completion for projects valued at $20,000 or more. If the cost is less than $20,000 no reconciliation is required.

The city also decided to increase its outreach to contractors. The city established routine education and outreach, sent postcards to all licensed contractors informing them of the policy changes and said it would issue information about reconciliation requirements in the information packets the city gives out when permits are issued.