Virus's effect on sales tax revenue varies

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Local governments across Colorado saw their sales tax revenue crater in June in the face of the COVID-19 pandemic, but in Ouray County the results were decidedly mixed.

The city of Ouray reported a 27 percent drop in sales tax revenue received in June compared to the same time last year, from $57,878 to $42,445.

The numbers actually reflect sales in April — there’s a two-month lag between the month in which the sales occur and the month in which local governments receive the tax revenue from those sales.

The decline isn’t surprising given Ouray’s tourism-dependent economy and the fact that nearly all businesses were shut down the entire month due to the coronavirus. Acting City Administrator Melissa Drake said she actually expected even less revenue.

“You never know until you get the results, but with almost every business shut down in the month of April, I was surprised” the revenue wasn’t lower, she said.

The most revenue came from internet purchases, which made up 39 percent of the total sales tax receipts that came into the city in June. The $16,707 in remote retail sales tax the city collected in June was nearly double the amount from June 2019.

The state last year began enforcing a new law based on a 2018 U.S. Supreme Court ruling that allows states to charge tax on purchases from out-of-state retailers.

Year to date, sales tax revenue in Ouray is actually up more than 10 percent — nearly $500,000 compared to a little more than $452,000 last year.

In Ridgway, sales tax from transactions in April and collected in June actually rose 2 percent, from $78,320 to $79,951. Town Clerk Pam Kraft attributes that to the town’s four retail marijuana shops, which Gov. Jared Polis declared essential businesses, allowing them to remain open throughout the pandemic. Taxes received from marijuana sales accounted for roughly half of Ridgway’s total sales tax revenue in April, Kraft said.

Ouray County, meanwhile, collected $58,910 in general fund sales tax revenue in June, reflecting April sales. That was a 16 percent increase over the same time last year. Year to date, the county has raked in more than $434,000 in general fund sales tax revenue — up 36 percent over 2019.

County Administrator Connie Hunt attributes much of the rise in revenue to a refinement in how sales taxes are collected. She said the state Department of Revenue in mid-2019 began working with municipalities to ensure taxes from internet sales and point-of-sale deliveries were being remitted to the proper communities. For example, she said, taxes collected on sales from residents who live in northern Ouray County but have Montrose addresses were going to Montrose County rather than Ouray County.

Hunt said she’ll closely watch sales tax revenue in the latter half of the year, since those collections reflect activity during the peak summer tourism season.