Filing Final Use Tax Reconciliation
Disclaimer: This summary is designed for general informational purposes; it is not intended to replace the actual applicable sections of the City of Aspen Municipal Code.
The City of Aspen adopted a 2.10% use tax requirement on construction materials and was first effective January 10, 2008. Use tax is a tax paid or required to be paid by a consumer for using, storing, distributing or otherwise consuming inside the corporate limits of the City of Aspen, construction materials that are acquired inside or outside of the corporate limits of the City of Aspen upon which a City of Aspen sales tax is not paid. Use tax is complementary to sales tax, and is due when City of Aspen sales tax is not paid on construction materials and fixtures and/or landscaping materials that are imported into the City.
WHO IS RESPONSIBLE:
The use tax requirement applies to all contractors and owners that use construction materials in the City. The liability is shared jointly between the general contractor and the owner, defined in these guidelines as “Purchaser.” However, the property owner is ultimately responsible for payment of the use tax if the contractor using the materials does not pay. In the event of nonpayment or incomplete payment, a use tax lien may be filed and foreclosed against the real property benefited by the construction materials and/or the real property of the contractor.
WHAT IS TAXABLE:
In all cases, a use tax deposit is required for work performed in the City that consumes construction materials, including non-permit work and landscaping. Generally, construction materials purchased outside the City and delivered into the City should not be charged sales tax by the vendor as use tax should be paid on those materials. Materials purchased outside the City and imported by the Purchaser for projects inside the corporate limits of the City of Aspen are subject to City of Aspen use tax.
WHEN AND HOW IS A USE TAX DEPOSIT AMOUNT DETERMINED:
The use tax deposit is paid when the master permit is issued. The use tax deposit calculation is based on master permit valuation. The first $100,000 of each master permit valuation shall be exempt from use tax. After deducting $100,000 from the master permit valuation, 2.1% shall be charged on 50% of the remaining valuation as an estimate of the expected tax due on materials used on the project.
For a project for which a use tax deposit has been paid, materials can be purchased without paying City of Aspen sales tax or any other municipal sales tax. Upon payment of the use tax deposit, Purchaser will be issued a Use Tax Certificate which should be presented to vendors in order to waive sales tax.
FINAL RECONCILIATION OF USE TAX:
The use tax deposit made upon master permit issuance is an estimation of the tax liability. Following the property's issuance of the certificate of occupancy, the Purchaser must submit a final reconciliation return, which reconciles the estimated materials at time of deposit to actual materials used on the project. This is required for every project. The final reconciliation form for use tax can be found here.
The final reconciliation return will demonstrate that (1) the Purchaser has met their use tax obligation, or (2) the Purchaser is due a refund, or (3) the Purchaser is required to make an additional use tax payment to meet their use tax obligation. A job cost report is required to be submitted with each return. All subcontractor material costs, along with general contractor and owner material costs must be included in the return. Subcontractor affidavits may be filed to validate material costs; however, additional support may be required such as a subcontractor job cost report and/or subcontractor invoices.
TIME FRAME FOR FILING FINAL RECONCILIATION:
The Purchaser must file a final reconciliation within 90 days following the issuance of the certification of occupancy. If this time frame is met, the Purchaser may be entitled to a refund of any overpayment between the estimated and final tax due. If a refund is due but the proper final reconciliation was not filed within the 90 days, the Purchaser will forfeit the entire deposit.
If the use tax deposit was not sufficient and an additional payment is required at the time of tabulating the final reconciliation, the Purchaser should include a check with the final reconciliation submittal for the outstanding balance, again within the 90 day window following issuance of the certificate of occupancy. Failure to remit the final outstanding balance due within the 90 day period will result in penalties and interest being assessed. Penalties and interest are assessed on late payment of taxes as follows:
- Penalties: Late return and/or payment 10.0% of unpaid tax.
- Interest: On unpaid taxes 1.5% per month.
Note: The City has three years from the issuance of certificate of occupancy to conduct an audit on any project.
WHAT IS THE DEFINITION OF CONSTRUCTION MATERIAL:
Definition of construction materials from the City of Aspen Municipal code 23.04.010: Tangible personal property which, when combined with other tangible personal property, loses its identity to become an integral and inseparable part of a completed structure or project including public and private improvements. This term includes, but is not limited to, such things as: asphalt, bricks, builders' hardware, caulking material, cement, concrete, conduit, electric wiring and connections, fireplace inserts, electrical heating and cooling equipment, flooring, glass, gravel, insulation, lath, lead, lime, lumber macadam, millwork, mortar, oil, paint, piping, pipe valves and pipe fittings, plaster, plumbing fixtures, putty, reinforcing mesh, road base, roofing, sand, sanitary sewer pipe, sheet metal site lighting, steel, stone stucco, tile, trees, shrubs, other landscaping materials, wall board, wall coping, wall paper, weather stripping, wire netting and screen, water mains and meters, and wood
preserver. The above materials, when used for forms, or other items which do not remain as an integral or inseparable part of a completed structure or project, are not construction materials.
WHAT ABOUT FABRICATION SERVICES:
When the Purchaser purchases both the materials and fabrication service from the same third party, charges for fabrication labor are included in the use tax calculation. The true object of such a transaction is the acquisition of a custom made article. In other words, use tax applies to charges for manufacturing, producing, fabricating, and processing tangible personal property which has been made-to-order or tailor made for the customer. Therefore, use tax is computed on the purchase price paid to acquire the machined item and the service costs components are included in the use tax calculation.
ARE APPLIANCES SUBJECT TO USE TAX:
Generally speaking, appliances are not subject to construction use tax. However, some appliances are considered fixtures and subject to the use tax. These fixtures are subject to the tax because they are not readily removable as a unit and they cannot be removed without damage to the structure or impairing the use of the fixture.
RECORDS AND AUDITS:
All use tax returns are subject to audit. Taxpayers must keep and preserve all invoices, receipts and statements showing such purchases of construction materials for a minimum of three years after the completion of project. The City of Aspen Finance Department may conduct an audit of those records within the three years to verify the accuracy of the actual
cost of construction materials reported per returns filed and the amounts of use taxes paid.