The Ketchum City Council on Monday directed staff to send a letter to contractors who work in the city clarifying that the city will no longer hold them responsible for collecting local-option taxes on building materials.
The decision came after a complex discussion about whether contractors should be responsible for collecting the city’s 1 percent tax on building materials purchased in or delivered to the city.
City attorney Stephanie Bonney said in an interview after the council meeting that vendors—located either in or outside of the city—are responsible for collecting the tax from contractors and paying it to the city.
“Basically, we’re not allowed to cut out the middleman,” she said, referring to the vendors.
She said the city formerly believed that it could request that contractors collect the tax. She said that would be more convenient for the city, as the city would not have to ensure that vendors all over the nation are properly charging the tax to contractors and then paying it to the city. However, after researching the issue further, she found that according to state law the city cannot request that contractors collect the tax directly; that responsibility will rest with vendors.
“The vendors are required to find out what they need to do to do business in Ketchum,” she said. “Obviously, it’s in our best interest to educate them.”
Bonney began researching the issue some two months ago after Ketchum drywall contractor Bill Glenn voiced concerns in written communications to the city that state law does not require contractors such as himself to shoulder the burden of collecting the tax. He said at a council meeting last month that he has lost business because other contractors have refused to hire him because he did not have a city sales tax permit.
In February 2012, the city sent a letter to contractors who work in the city stating that they are responsible for collecting the tax.
“Subcontractors just ate [the letter] hook, line and sinker,” Glenn said at the meeting on Monday. “It has caused a huge change in how things are done.”
Glenn said he wants that letter “rescinded.”
Mayor Randy Hall said that the last thing the city wants to do is “create a higher burden for people who want to get work.” Bonney and Community and Economic Development Director Lisa Horowitz suggested that they write a letter to “clarify” the 2012 letter that would state that contractors are not responsible for collecting the tax.
“I think that’s reasonable,” Hall said. “We have not collected any illegal funds. There’s been no malice.”
Glenn had suggested that the city has collected money from contractors that they shouldn’t have had to pay. He said the city should pay it back. In the interview, Bonney said that, either way, contractors are responsible for paying the tax.
“It’s only an issue on how the tax is collected. There’s never been any mistake on who pays the tax and what the tax is paid on,” she said.
Horowitz said in an interview after the meeting that the city will send the letter sometime next week.
Brennan Rego: email@example.com