Manufacturers call for a city study on sales-and-use tax

About 40 Colorado Springs manufacturers have signed a letter asking the city to reduce, rebate or eliminate the sales-and-use tax for manufacturing equipment.

The Pikes Peak Regional Manufacturing Consortium said that manufacturing is crucial to economic vitality of the city. Both small and large manufacturers are primary employers and manufacturing jobs are considered multipliers, meaning that for every one manufacturing job there are three other support jobs created, they said.

Colorado Springs manufacturers feel hassled by the city’s 2.5 percent sales-and-use tax on manufacturing equipment, especially because one piece of high-tech equipment can cost millions of dollars. Some say the use tax is a double burden because businesses are already taxed annually on personal property.

In Colorado Springs, a 2.5 percent use tax is levied on the purchase, lease or rental of tangible personal property — furniture, fixtures, equipment and operating supplies. It’s the same as the city’s sales tax.

Sales taxes are paid directly to the seller, who pays the city. Use tax is paid directly to the city. For example, if a business buys equipment from an out-of-state company and pays no city sales tax, but equipment is used  in Colorado Springs, it must pay the city use tax.

Waiving that tax could be an incentive to draw more manufacturing companies to the city and county, the consortium said. In the last decade, El Paso County lost more than 50 percent of its manufacturing jobs.

Colorado Springs has a sliding scale on the rate of use taxes to encourage large investments into the community. However, it only applies to companies that spend more than $5 million on a single equipment purchase.

The sales-and-use tax is considered by local manufacturers a barrier to doing business in the Springs, said Jennifer Taylor, Greater Colorado Springs Chamber and EDC vice president of local industry.

The chamber & EDC hosted a manufacturing forum at Pikes Peak Community College Friday. The group of manufacturers had a chance to review the letter to the city and sign it.

“We want an analysis of the amount that comes from manufacturing,” she said. “We don’t have the answer to that right now.”

Last year, sales-and-use tax on all equipment pumped about $7 million into the city’s general fund. the city doesn’t break the numbers down to show how much money comes from different sectors of the business community.

A breakdown of the tax dollars will give the manufacturing group an idea of how much money manufacturers contribute to the city coffers and if the city could provide services without it.

“The group would like to work cooperatively with the city of Colorado Springs to analyze the economic impact of the sales and use tax on manufacturing equipment,” the letter says. “The group would like to ask for Mayor Bach’s support to pursue this analysis so that we can come up with a win/win solution to the problem.”