City grapples with misdirected taxes

Posted 11/11/09

More than 10 months after starting to collect its own sales-and-use taxes under home rule, Centennial is still working out the kinks. The 8-year-old …

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City grapples with misdirected taxes


More than 10 months after starting to collect its own sales-and-use taxes under home rule, Centennial is still working out the kinks.

The 8-year-old city of 103,000 remains invisible to many — businesses and taxpayers alike — despite the new powers granted the city in 2008 when voters approved Centennial’s home-rule charter.

Many people live, shop, do business or just stop to have lunch in Centennial, without ever realizing they are in the city formed from unincorporated Arapahoe County in 2001.

As discussed at a city council meeting on Nov. 2, confusion about Centennial’s boundaries and proximity to cities like Aurora, Greenwood Village and Littleton continues to manifest, often in counter-intuitive ways.

“I walked into a business that was clearly in Centennial, a brick and mortar business, a restaurant,” District 4 City Councilmember Todd Miller said. “They had a Centennial sales-tax license just like they should, and they had an Aurora business license.”

Confusion about Centennial’s meandering barbell-shaped presence amid other suburbs is one thing, but the sight of two contradictory licenses, on display side by side, left the official from east Centennial flabbergasted.

“I have more and more businesses on our side of town that for some reason have Aurora business licenses,” he said. “I would be glad to go to Aurora and say, ‘Quit submitting licenses to people in Centennial. Tell them they’re not in Aurora.’”

Some businesses do not seem to even recognize Centennial’s existence — especially larger stores outside the city that deliver to Centennial residents and are supposed to send the applicable taxes to a consumer’s city of residence.

District 2 Councilmember Sue Bosier said she has seen a consistent problem at a “big box” store in a city bordering Centennial.

“Their cash register was set up so that Centennial would never come up with my ZIP code,” she said.

Such post-home-rule tales have confirmed the long-circulating rumors of misdirected tax payments. The problem had been one of the most significant arguments made for moving Centennial to a home-rule system.

“While I think we always had a sense that [misdirected payments] were out there, it’s significant that we’ve now identified these folks,” Mayor Randy Pye said.

Since taking over tax collection from the Colorado Department of Revenue after going home rule, the city has been paying closer attention to the businesses that should and should not be sending their tax payments to Centennial.

As of Oct. 22, 1,126 business in the city were found to have been operating without a Centennial business license, according to city management analyst Karen Stickland.

“As we go further into the collection process and refine our notices to businesses that have not filed returns, we’re seeing a higher level of compliance,” she said.

In October, Centennial collected $1.6 million in sales-and-use taxes.

The city receives about 25 applications for new business licenses every day, according to Stickland.

Per home rule, the city is in the process of auditing 16 businesses and recipients of building permits for proper tax payments.

According to Stickland, the city is taking steps to correct previous mispayments and to recoup the misdirected funds.

“We will be going to businesses and expect them to go back and correct their reporting for at least three years. We will be working with other jurisdictions as well,” she said.

Stickland said the next focus will be on outside businesses that deliver to the city. The city expects to work with retailers’ computer staff to correct errors related to ZIP codes that Centennial shares with neighboring municipalities.

“We don’t want anymore sales tax than what’s due to us, but we do want what’s due to us,” Stickland said.


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