To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Trish Muller, CPA, Finance Director
Title
Ordinance Amending Chapters 3.04 and 3.05 of the Castle Rock Municipal Code to Eliminate the Sales Tax Exemption for Cigarettes Contained in Section 3.04.090.GG and to Further Clarify Definitions and Processes for the Collection of Sales and Use Tax (First Reading)
Body
________________________________________________________________________________
Executive Summary
Staff recommends that Town Council approve on first reading the ordinance amending Chapters 3.04 and 3.05 of the Castle Rock Municipal Code. The ordinance removes the Town sales tax exemption for cigarettes and clarifies the treatment of lodging, economic nexus, place of sale, and tax collection and liens. These changes modernize the Town’s tax code, provide clearer direction to businesses and taxpayers, and support consistent administration of existing sales and use tax requirements.
Discussion
Eliminate the cigarette sales tax exemption - Section 3.04.090.GG
Repeal the existing exemption for cigarette sales. Cigarette purchases will become subject to the Town’s existing sales tax, consistent with other taxable retail transactions. The ordinance does not establish a separate cigarette tax rate.
Clarify lodging coverage - Chapter 3.04
Expressly identify short-term rentals and similar accommodations within the definition of lodging. Retain the exclusion for qualifying long-term occupancy. This amendment clarifies how the existing tax provisions apply to lodging businesses.
Clarify economic nexus - Chapter 3.04
Reference the applicable Colorado statutory sales threshold and clarify when remote sellers and marketplace facilitators establish economic nexus for Town sales tax purposes. The change provides a clearer standard for determining collection responsibilities.
Clarify place-of-sale rules - Section 3.04.100
Revise the place-of-sale provisions to clarify how the delivery of tangible personal property and the transfer of title affect the location of a sale for Town tax purposes. This supports consistent treatment of transactions involving delivery.
Update tax collection and lien provisions - Sections 3.05.170 and 3.05.190
Clarify distraint-warrant terminology, describe categories of property subject to collection remedies, and update tax lien provisions. These amendments are intended to make the Town’s collection procedures clearer and more administrable.
Budget Impact
Eliminating the sales tax exemption for cigarettes may result in an increase in Town sales tax revenue; however, staff anticipates the additional revenue will be de minimis and will not have a material impact on overall sales tax collections. This expectation is consistent with conclusions reported by other Colorado municipalities that have implemented similar changes to the taxability of cigarettes. The remaining proposed amendments are primarily administrative in nature and are not anticipated to have a significant fiscal impact.
Staff Recommendation
Staff recommends that Town Council approve the ordinance amending Chapters 3.04 and 3.05 of the Castle Rock Municipal Code, as introduced, on first reading. The amendments remove the cigarette exemption and provide clearer, more consistent sales and use tax administration.
Proposed Motion
“I move to approve the Ordinance Amending Chapters 3.04 and 3.05 of the Castle Rock Municipal Code to Eliminate the Sales Tax Exemption for Cigarettes and Clarify Sales and Use Tax Administration, as introduced, on first reading
“I move to approve the Ordinance as introduced by title, on first reading, with the following conditions: [state conditions].”
“I move to continue this item to the Town Council meeting on [date] to allow additional time for [state information or revisions needed].”
Attachments
Attachment A: Proposed Ordinance Amending Chapters 3.04 and 3.05 of the Castle Rock Municipal Code (to accompany Council packet)