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Shop at Walmart, Pay More Sales Tax


 Walmart decides to collect controversial sales tax.

The Pikes Peak Rural Transportation Authority (PPRTA), established in 2004, is a collaboration of five local governments—Colorado Springs, El Paso County, Manitou Springs, Green Mountain Falls, and Ramah—created to solve regional transportation issues. PPRTA levies a 1% sales tax in participating communities to fund transportation and transit improvements.

Fountain, Colorado, is a home rule city in El Paso County that in 2009 approved a 0.5% local transportation sales tax to fund transportation capital improvement projects. Fountain is not a member of the PPRTA. Therein lies the origin of our tale.

The City of Fountain and PPRTA now find themselves at odds over a plot of land located in unincorporated El Paso County until annexed by Fountain in 2014. Prior to the annexation, the 1% PPRTA sales and use tax would have applied to any sales occurring on that (then bare) land. Post annexation, sales are subject to the Fountain local 0.5% transportation sales tax.

The question is, does the PPRTA tax still apply?

Finding an answer has become particularly pressing since a new Walmart opened on the site in mid-July.

No

The mayor and city council of Fountain argue that the 1% PPRTA sales and use tax does not apply. Walmart agrees. Anne Hatfield, a spokesperson for Walmart, told The Gazette, “Currently, no patron of any business in Fountain is subject to the 1 percent PPRTA tax. Walmart and Sam’s Club believe strongly that our Fountain customers should be treated the same way.”

Yes

The board of the PPRTA insists that the 1% tax does apply. In a letter to the City of Fountain, the Colorado Department of Revenue, and the property developer, the board noted “provisions of state law that allow special districts to continue taxation on land that is subsequently annexed by non-member governments” (KOAA.com). According to a spokesperson for PPRTA, the organization has hired attorneys and is preparing for litigation:

“Based on our legal counsel’s reading of RTA statutes, and after conferring with the Department of Revenue, PPRTA sent notice of our intent to collect the PPRTA sales and use tax in February. As you know, El Paso County is part of the PPRTA, and Fountain is not. Walmart and the developer are questioning whether property annexed from an RTA member government to a non-member government must continue to pay the tax. It looks like the matter is headed to litigation for a decision.”  (Colorado Springs Independent).

Tax until proven untaxable

Until the matter is resolved, Walmart will collect both the 0.5% Fountain tax and the 1% PPRTA tax in addition to the state sales tax, for a grand total of 8.924%. It may not be popular among consumers, but it is the most prudent course of action.

According to the Fountain Valley News Facebook page:

“Mayor Gabriel Ortega provided this explanation (regarding the almost sales tax rate at the new Fountain Walmart and Sam’s Club): As of right now Wal-mart is working with the Dept. of Revenue to get this tax taken away. There is a disagreement as to whether this taxing authority can tax an entity such as Wal-Mart even though they do not reside within the borders of the authority. It is the position of the City that the PPRTA believes that they can tax in a jurisdiction that isn’t a member and is not represented by them. We obviously believe very differently and it’s likely that this issue will be litigated. We hope to have this matter resolved in our favor and give us the ability to stop collecting the tax, taking us to our normal sales tax. There isn't a timetable yet but it is working its way through the process as quickly possible.”

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photo credit: Walmart via photopin (license)


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.