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Colorado self-governing municipalities sue state over sales tax exemption law

On Friday, five self-governing municipalities sued the state of Colorado over a new law they say imposes state control over their taxing authority.

“The power to collect sales and use taxes to generate revenue is at the heart of self-governing municipalities and a core function of municipal operations,” Denver City Attorney Kristin Bronson said in a statement. “HB 22-1024 illegally infringes on the Constitution of Colorado, and residents of self-governing municipalities have the full right of autonomy in local and municipal affairs.”

Besides Denver, the plaintiffs are Boulder, Commerce City, Pueblo and Westminster.

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The state and some local governments exempt construction and building materials related to public schools, among other public works, from sales and use taxes. The new law in question, which Gov. Jared Polis signed in April, extended the exemption from collecting sales tax for construction materials from public schools to self-governing cities. Prior to the law, self-governing cities could still levy sales and use taxes on these building materials.

“For decades, self-governing cities in Colorado have wielded this power to levy and collect sales and use taxes on goods and services, regardless of whether the state levies or collects sales and use taxes. of use on the same goods and services,” the complaint reads.

Denver collects about $2 million to $4 million a year in these taxes, according to the lawsuit filed in Denver District Court. Pueblo raises between $3 million and $4 million per year and Commerce City raises about $1.5 million per year.

The plaintiffs argue that the law, which goes into effect Aug. 10, violates the state Constitution and that the state legislature cannot prevent self-governing municipalities from exercising their taxing power. They are asking for a court order that will stop the law from going into effect.

2022-06-30 16-24-30 Complaint

Teresa R. Cabrera

The author Teresa R. Cabrera