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TC Ord. No. 23-04 Referring a Ballot Question Regarding Use Tax on Construction Materials to the November 7, 2023 Election and Amending the Avon Municipal Code to Establish Chapter 3.09 Use Tax on Construction MaterialsAvon C O L O F A D O ORDINANCE NO. 23-04 REFERRING A BALLOT QUESTION REGARDING USE TAX ON CONSTRUCTION MATERIALS TO THE NOVEMBER 7, 2023 ELECTION AND AMENDING THE AVON MUNICIPAL CODE TO ESTABLISH CHAPTER 3.09 USE TAX ON CONSTRUCTION MATERIALS WHEREAS, pursuant to C.R.S. §31-15-103 and §31-15-104, and pursuant to the home rule powers of the Town of Avon ("Town'), the Avon Town Council ("Council") has the power to make and publish ordinances necessary and proper to provide for the safety, preserve the health, promote the prosperity, and improve the morals, order, comfort, and convenience of its inhabitants; and WHEREAS, Council finds that the referral of a 4% Use Tax on Construction Materials to the Avon electorate is appropriate and beneficial for the Avon community in order to reduce the administrative burden of Town and builders, to adopt a use tax that matches the Town's sales tax, to increase the collection of revenues related to new construction for general government purposes and to increase revenues in the Village (at Avon) for the purpose of accelerating the satisfaction of the Town's tax credit obligations; and WHEREAS, the Council finds that adoption of a use tax will promote the health, safety and general welfare of the Avon community; and, WHEREAS, approval of this Ordinance on first reading is intended only to confirm that the Town Council desires to comply with the requirement of Section 6.5(d) of the Avon Home Rule Charter by setting a public hearing in order to provide the public an opportunity to present testimony and evidence and that approval of this Ordinance on first reading does not constitute a representation that the Town Council, or any member of the Town Council, has determined to take final action on this Ordinance prior to concluding the public hearing on second reading. NOW, THEREFORE, BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF AVON, COLORADO the following: Section 1. Recitals Incorporated. The above and foregoing recitals are incorporated herein by reference and adopted as findings and determinations of the Town Council. Section 2. Chapter 3.09 Enacted. A new Chapter 3.09 - Use Tax on Construction Materials in the Avon Municipal Code, set forth in EXHIBIT A: Chapter 3.09 attached hereto, is hereby enacted subject to voter approval as described in Section 3 of this Ordinance. Section 3. Election and Effective Date. Under Article X, Section 20 of the Colorado Constitution, the Council refers the tax increase provided in this ordinance to the qualified electors of the Town for approval at the regular Town election scheduled for November 7, 2023. Ord 23-04 Use Tax on Construction Materials July 25, 2023 Page 1 of 2 If approved by a majority of the electors voting thereon, this ordinance shall become effective when the Town Clerk or other designated election official duly files the required certificate of election, or on January 1, 2024, whichever occurs last. Section 4. Ballot Title and Questions. The ballot title and question submitted to the electors shall be as follows: Ballot Title: USE TAX ON CONSTRUCTION MATERIALS Ballot Question: SHALL TOWN OF AVON TAXES BE INCREASED SIX MILLION DOLLARS ($6,000,000.00) ANNUALLY IN 2024, AND BY WHATEVER ADDITIONAL AMOUNTS ARE RAISED ANNUALLY THEREAFTER, BY THE IMPOSITION OF A FOUR PERCENT (4%) USE TAX ON THE PRIVILEGE OF USING OR CONSUMING IN THE TOWN ANY CONSTRUCTION MATERIALS, SUCH USE TAX REVENUES TO BE APPROPRIATED AND SPENT FOR ANY MUNICIPAL PURPOSE, IN ACCORDANCE WITH SUCH TERMS, CONDITIONS AND POLICIES AS MAY BE ADOPTED BY THE AVON TOWN COUNCIL, ALL IN ACCORDANCE WITH ORDINANCE NO.23-04 ADOPTED BY THE TOWN COUNCIL; AND SHALL THE REVENUES COLLECTED FROM SUCH TAX AND ANY EARNINGS FROM THE INVESTMENT OF SUCH REVENUES BE COLLECTED AND SPENT AS A VOTER APPROVED REVENUE CHANGE AND AN EXCEPTION TO THE LIMITS WHICH WOULD OTHERWISE APPLY UNDER ARTICLE X, SECTION 20 OF THE COLORADO CONSTITUTION OR ANY OTHER LAW? INTRODUCED AND ADOPTED ON FIRST READING AND REFERRED TO PUBLIC HEARING by the Avon Town Council on July 27, 2023, and setting such public hearing for August 8, 2023 at the Council Chambers of the Avon Municipal Building, located at One Hundred Mikaela Way, Avon, Colorado. ADOPTED ON SECOND AND FINAL READING by the Avon Town Council on August 8, 2023, after conducting a public hearing. :SEAL,: o*n Clerk �oic�gaoo� e PAillips, M APPROVED AS TO FORM: If Wilton E. Anderson, Town Attorney Ord 23-04 Use Tax on Construction Materials July 25, 2023 Page 2 of 2 ATTEST: Casanueva, EXHIBIT A: Chapter 3.09 — Use Tax on Construction Materials CHAPTER 3.09 — Use Tax on Construction Materials 3.09.010 — Title, Purpose, and Applicability. (a) This Chapter shall be known and may be cited as "The Town of Avon Use Tax on Construction and Building Materials." (b) The purpose of this Chapter is to raise revenue for municipal purposes and provide a complementary tax to the Town's sales tax. The Town Council find that every person who uses or consumes in the Town any construction and building materials is exercising a taxable privilege. (c) Subject only to the exemptions set out at Section 3.09.040, the use tax imposed herein shall apply to any use or consumption in the Town of construction and building materials purchased at retail on or after January 1, 2024. 3.09.020 — Definitions When not otherwise clearly indicated by the context, the following words and phrases, as used in this chapter, shall have the following meanings: Building permit means a permit, issued by the Town, allowing the permit holder to construct, enlarge, repair, move, demolish, or change the occupancy of a building or structure, or to erect, install, enlarge, alter, repair, remove, convert, or replace any electrical, gas, mechanical, or plumbing system regulated by the adopted building codes of the Town. A building permit shall not include any permit for demolition or dewatering. Charitable organization means any entity which has been certified as a nonprofit organization under Section 501(c)(3) of the Internal Revenue Code. Construction equipment means any equipment, including mobile machinery and mobile equipment, which is used to erect, install, alter, demolish, repair, remodel, or otherwise make improvements to any real property, building, structure, or infrastructure, whether leased or owned. Construction Materials means tangible personal property which, when combined with other tangible personal property, loses its identity to become an integral and inseparable part of a structure or project including public and private improvements. Construction Materials include, but are not limited to, such things as: asphalt, bricks, builders' hardware, caulking material, cement, concrete, conduit, electric wiring and connections, fireplace inserts, electrical heating and cooling equipment, flooring, glass, gravel, insulation, lath, lead, lime, lumber, macadam, millwork, mortar, oil, paint, piping, pipe valves and pipe fittings, plaster, plumbing fixtures, putty, reinforcing mesh, road base, roofing, sand, sanitary sewer pipe, sheet metal, site lighting, steel, stone, stucco, tile, trees, shrubs and other landscaping materials, wall board, wall coping, wallpaper, weather stripping, wire netting and screen, water mains and meters, and wood preserver. The above materials, when used for forms, or other items which do not remain as an integral and inseparable part of completed structure or project are not construction materials. Construction valuation means the total value of the work, including labor and construction and building materials, for which a permit is issued, including leased construction equipment, electrical, gas, mechanical, plumbing equipment and permanent systems, as determined by the building department or building official. Consumption means the act or process of consuming, and includes waste, destruction, or use. Consumption is the normal use of property for the purpose for which it was intended. Contractor means any person who shall build, construct, reconstruct, alter, expand, modify, or improve any building, dwelling, structure, infrastructure, or other improvement to real property for another party pursuant to an agreement. For purposes of this definition, Contractor also includes subcontractor. Director means the Director of Finance for the Town or such person's designee. Person means any individual, firm, partnership, joint venture, corporation, limited liability company, estate or trust, receiver, trustee, assignee, lessee, or any person acting in a fiduciary or representative capacity, whether appointed by court or otherwise, or any group or combination acting as a unit. Purchase or sale means the acquisition for any consideration by any person of tangible personal property by way of purchase, lease, or rental, including capital leases, installment and credit sales, and lease -purchase, rental or grant of a license to use, which consideration may include money, exchange of property or services, or any other thing of value. Purchase price means the aggregate value in money of anything or things paid or delivered or promised to be paid or delivered by a purchaser to a retailer or any person in the consummation of a retail sale as defined herein, without any deduction therefrom for the cost of the property sold, cost of materials used, labor or service cost, or any other expense whatsoever, and provided that when articles of tangible personal property are sold after manufacture or after having been made to order, the gross value of all materials, labor, service, and profit thereon shall be included in the purchase price; provided that the purchase price shall not include any direct tax imposed by the United States government, the state, or this chapter. Retail Sale or Purchased at Retail means any purchase or sale of tangible personal property, except a wholesale sale or purchase made for taxable resale. Taxpayer means any person obligated to collect and/or pay tax under this Code. Town means the Town of Avon. Use means the exercise, for any length of time, by any person with the Town of any right, power or dominion over tangible personal property or services when rented, leased, or purchased 2 at retail from sources within or with the Town; or tangible personal property used in the performance of a contract in the Town, whether or not owned by the taxpayer. Use also includes withdrawal of items from inventory for consumption. Wholesale sales mean a sale to a licensed retailer, jobber, dealer, or other wholesaler for resale. Sales by wholesalers to consumers, including persons who use or consume construction and building materials, as defined by this Section, are not wholesale sales. Sales by wholesalers to non -licensed retailers are not wholesale sales. Wholesaler means any person selling to retailers, jobbers, dealers, or other wholesalers, for the purpose of resale and not for storage, use, consumption, or distribution. 3.09.030 — Use tax imposed. (a) There is hereby imposed and levied in the Town, and shall be collected and paid, a use tax on the privilege of using or consuming within the Town construction and building materials of every kind and form purchased or leased inside or outside the Town. (b) The use tax imposed by this Chapter shall be at the rate of four percent (41/o) of the cost of construction and building materials used or consumed in the Town, including leased equipment. For purposes of this Chapter, the cost of construction and building materials is deemed to be fifty percent (50%) of the construction valuation. (c) Any construction and building material used or consumed on a project which has received all final development review approvals required by Title 7 of the Avon Municipal Code on or before December 31, 2023, shall not be subject to the use tax imposed herein. If any approval expires by its terms after December 31, 2023, such application for development review shall then be subject to the use tax imposed by this Chapter. 3.09.040 — Exemptions. The following are exempt from the use tax imposed by this chapter, provided that the list of exemptions cannot be increased by implication or similarity and the burden of proof is upon the taxpayer to establish an exemption: (a) The use or consumption of construction and building materials the sale of which is subject to a retail sales tax imposed by the Town; (b) The use or consumption of construction and building materials purchased for resale in the Town, either in their original form or as an ingredient of a manufactured or compounded product, in the regular course of business; (c) The use or consumption of construction and building materials by the United States government; by the State, its departments or institutions or political subdivisions thereof in their governmental capacities only; or by the Town; providing, however, that no commercial, industrial or other banking institution, organized or chartered by the United States government, any agency or department thereof, or by the State, shall be considered a governmental institution for the purpose of this exemption; (d) The use or consumption of construction and building materials by charitable organizations in the conduct of their regular charitable functions; except that nothing herein contained shall be deemed to exempt use of construction and building material or supplies used by a contractor for the construction of an improvement for a charitable organization; (e) The use or consumption of construction and building materials by a person engaged in the business of manufacturing or compounding for sale, profit, or use of any article, substance, or commodity, which construction and building materials enters into the processing of or becomes an ingredient or component part of the product or service which is manufactured, compounded, or furnished, and the container, label, or the furnished shipping case thereof; (f) The use or consumption of construction and building materials if a written contract for the purchase thereof was entered into prior to January 1, 2024; (g) The use or consumption of construction and building materials required or made necessary in the performance of any construction contract bid, let, or entered into at any time prior to January 1, 2024; (h) The storage of construction and building materials; (i) A building project, subject to a Town of Avon Building Permit, with a total construction valuation of fifty thousand dollars ($50,000.00) or less; (j) The use or consumption of construction and building materials in the Town on which the use tax imposed by this Chapter has already been paid; and (k) Any transaction which the Town is prohibited from taxing under applicable law. 3.09.050 — Credit for taxes paid to another taxing authority. (a) The Town's use tax shall not apply to the use or consumption of any construction and building materials the sale or use of which has already been subjected to a legally imposed sales or use tax of another statutory or home rule town, city, or city and county equal to or in excess of the use tax imposed herein. (b) A credit shall be granted against the Town's use tax in an amount equal to lawful tax previously paid by the purchaser or user to another taxing authority, provided that the amount of credit shall not exceed the amount of use tax imposed by this Chapter. (c) The burden of proof is upon the taxpayer to establish the right to any credit claimed. 4 (d) It is the intent of this Chapter for Town taxes to be paid at the time a building permit is issued. Once such permit is issued, persons engaged in construction projects in the Town are considered to be the end users of construction and building materials and must not pay municipal sales tax to a retailer in another jurisdiction for materials to be used or consumed in the Town. No refund or credit of another municipality's tax will be allowed unless such tax is legally imposed. 3.09.055 — Tax credit for the Village (at Avon). Notwithstanding any other provisions of this Chapter, there shall be granted to each person owing tax on use or consumption of building materials within The Village (at Avon) a temporary tax credit equal to the amount of any Building Materials Use Fee paid by or on behalf of such person for that same use or consumption. The amount of the credit shall not exceed the amount of use tax owed. This credit shall expire with the termination of the Building Materials Use Fee as set out in the Consolidated, Amended and Restated Annexation and Development Agreement for The Village (at Avon), as recorded with Eagle County on August 1, 2014. Neither the ability of the Town to grant the temporary tax credit nor termination of the tax credit shall constitute a tax increase, the imposition of a new tax, or a tax policy change. 3.09.056 - Tax credit for Community Housing. Notwithstanding any other provision of this Chapter, there may be granted a tax credit to each person owing tax on the use or consumption of construction and building materials and fixtures used in a Community Housing project provided that such use tax credit is approved by Council by resolution in accordance with Chapter 3.14. Neither the ability of the Town to grant this tax credit nor the repeal or termination of this tax credit shall constitute a tax rate increase, the imposition of a new tax or a tax policy change. 3.09.057 - Temporary tax credit for renewable energy production components. Notwithstanding any other provision of this Chapter, there shall be granted a temporary tax credit to each person owing tax on the use or consumption of components used in the production of electricity, generation of heat or cooling of air, from a renewable energy source, including but not limited to wind, solar, solar thermal systems, and geothermal energy systems, provided that this temporary tax credit shall commence on the effective date of this ordinance and shall continue until December 31, 2024, whereupon this temporary tax credit shall automatically expire unless extended by adoption of an ordinance. Neither the ability of the Town to grant the temporary tax credit nor the termination of the credit shall constitute a tax increase, the imposition of a new tax or a tax policy change. 3.09.060 — Collection and administration. (a) The administration of this chapter is hereby vested in the Director, who shall prescribe forms and promulgate rules and regulations for the proper administration and enforcement of this chapter. The Director may delegate to any person the power and authority necessary for the proper administration and enforcement of this chapter. (b) The use tax required by this Chapter shall initially be made by estimate, which estimated amount must be paid at or prior to the time any permit for building or construction within the Town is issued. No permit shall be issued by the Town Building Official, or any other town employee, to any person requesting a permit for construction within the Town until such estimated use tax has been paid, except as described below for single-family and duplex residential building permits. The tax estimate shall be made by the Director, working with the Community Development Department to determine the Construction Valuation. A single family or duplex building permit applicant may request deferral of the payment of the Use Tax until completion of construction which payment in full shall then become a condition of issuing a Temporary Certification of Occupancy or Certificate of Occupancy. (c) All use taxes due to the Town must be paid in full before a final building inspection may take place and a permanent or temporary certificate of occupancy issued. The Director may determine the amount of use taxes due to the Town before final inspections occur or certificates of occupancy issue. To assist in this determination, the Director may request information from the taxpayer, who shall timely provide it, which information may include proof of actual amounts paid for construction and building materials used or consumed in the building project. (d) A person engaged in a construction project in the Town who does not apply for and have issued a permit or who seeks and obtains prior approval of the Director to remit use taxes in accordance with this Subsection (d) shall, on or before the twentieth day of each succeeding month following the start of construction, file a return with the Director attaching all statements and invoices establishing the price paid for building and construction materials used in the local project, along with a summary sheet for materials purchased the previous month, and shall thereupon pay to the Town the full amount of use tax due for the preceding month or months. Any failure to make such return and payment of such use tax shall be deemed a violation of this Chapter, which may, upon conviction, subject the violator to penalties provided. 3.09.070 — Penalty and Interest. (a) If any person fails, neglects, or refuses to pay the use tax as required by this chapter, or if any taxpayer fails to remit the proper amount of tax or underpays the tax, then penalties and interest shall be imposed in accordance with this section. (b) If a person neglects or refuses to pay any use tax as required by this Chapter within ten (10) days after the same is due, the Director shall make an estimate, based upon such information as may be available, of the amount of use tax due for the period for which the taxpayer is delinquent and shall add thereto a penalty equal to the greater of fifteen dollars ($15.00) or ten percent (10%) of the amount due and interest at the rate 6 of one -and -a -half percent (1.5%) per month from the time delinquent payment was due. (c) If any part of the deficiency is due to fraud with the intent to evade the tax, there shall be added a penalty of one hundred percent (100%) of the total amount of the deficiency, and in such case the whole amount of the tax unpaid, including the additions, shall become due and payable ten (10) days after written notice and demand by the Director, and an additional three percent (30/6) per month on said amount shall be added from the date payment was due, until paid. (d) The Director may, for good cause shown, waive any penalty or interest. 3.09.080 — Remedies not exclusive. In addition to enforcement remedies expressly provided in this chapter, the Town may pursue any other remedies available at law or in equity. 3.09.090 — Lien. The tax imposed by this Chapter, together with accrued interest and penalties, shall be a first and prior lien on any real property into which the construction and building materials were incorporated. 3.09.100 — Limitation of Action. Use tax, interest, and penalties shall be assessed, and any action to collect the same shall be commenced, within three (3) years of the issuance of a final certificate of occupancy for the improvement on which the use tax was paid. This period of limitation shall not run for any period of time covered by an audit if written notice of that audit is given to the taxpayer prior to expiration of the limitation period. 3.09.110 — Refunds. (a) Upon completion of construction, the taxpayer may apply to the Director for a refund of overpaid taxes. Such application shall be supported by documentation required by the Director or as needed to establish actual amounts paid for construction and building materials used or consumed as part of a building project. (b) A taxpayer claiming an exemption may pay the use tax under protest. Applications for refund of such protested tax must be made within sixty (60) days of issuance of the building permit for which the use tax was paid under protest. (c) A taxpayer claiming refund for use tax paid by mistake or in error must make that claim within three (3) years of the final inspection or issuance of a permanent certificate of occupancy, whichever comes later, for the improvement on which the use tax was paid. (d) All claims for refund shall be upon forms prescribed by the Director and made in such manner as required by the Director. The Director shall promptly review refund claims and issue a denial in writing, state the reason therefor, or provide the funds requested, after applying any refund amount against outstanding tax liabilities. (e) If a taxpayer disputes a refund denial, the taxpayer shall provide the Director with a written protest, filed within 30 days of the Director's notice. The protest shall identify specific grounds for dispute, including any necessary documentation, and shall request a hearing before the Director. This protest process, and that of any related appeal, shall be in accordance with Section 29-2-106.1, Colorado Revised Statutes. (e) The right to refund shall not be assignable. 3.09.120 — Audit. (a) The Town may audit, or the taxpayer request an audit, within three (3) years from the issuance of any certificate of occupancy for the improvement on which the use tax was paid. An audit requested by the taxpayer shall be at the taxpayer's sole cost. (b) If the recomputed use tax is less than the amount of use tax paid by the taxpayer, the difference shall be refunded to the taxpayer within thirty (30) days of the final determination of the Town. If the recomputed use tax is more than the amount of use tax paid by the taxpayer, the difference, along with any interest and penalty imposed by this chapter, shall be due and payable by the taxpayer immediately upon the final determination of the Town with notice to the taxpayer. 3.09.130 — Book, Records, Reports, and Returns. (a) Every person liable for any use tax imposed by this chapter shall keep and preserve, for a period of three (3) years from the date of issuance of a final certificate of occupancy for the improvement on which the use tax was paid, all books, records, reports and returns necessary to determine the amount of tax liability. All such books, records, reports, and returns shall be open for examination at any time by the Director. (b) Any information gained by taxpayer disclosure or as part of an audit or investigation shall be entitled to the same level of confidentiality afford to sales tax information, as set out in Chapter 3.08 of the Avon Municipal Code. (c) For the purpose of determining the amount of tax due from any taxpayer, the Director may hold investigations and hearings concerning any matters covered by this Chapter, and may examine any relevant books, papers, records, or memoranda of any such person, requiring the attendance of such taxpayer, or any officer or employee of such taxpayer, or of any person having relevant knowledge, and taking such testimony and proof as may be necessary to properly ascertain any tax liability. The Director shall 8 have power to administer oaths to any person in the course of such investigations or hearings. Production of documents and attendance of witnesses shall be requested by the Director on his or her own motion or on motion of any party; any request for production or attendance shall inform persons that compliance is voluntary but that, if the request is not complied with, the Director may apply to the Municipal Judge for issuance of a subpoena. (d) The Municipal Judge, upon application of the Director, may compel the attendance of witnesses, the production of books, papers, records or memoranda, and the giving of testimony before the Director or any of his or her duly authorized agents, by the issuance and enforcement of subpoenas, in the same manner as production of evidence may be compelled before the court. 3.09.140 — Violation and Penalty (a) It is a violation of this Chapter for any person subject to the use tax levied by this chapter to submit any false or fraudulent use tax information to the town, to make any false statement on any document used to calculate taxes due under this chapter, to fail or refuse to make payment of any taxes due, to evade the payment of any taxes due, or to aid or abet another in any attempt to evade the payment of any taxes due under this chapter. (b) In addition to any other penalty provided in this Chapter, any person who violates any provision of this Chapter shall be punished in accordance with Section 1.08 of the Avon Municipal Code. Q