City sales tax: A leak in the system
Want to save $1,290 on a $15,000 Rolex watch? Buy it here, but ship it home. If Aspen is home, ship it to your mom in Iowa and have her mail it back.City officials call that savings “leakage.” It’s sales tax that isn’t collected on purchases, from antiques to fur coats, expensive jewelry to artwork. The tax on local purchases is 8.6 percent – including 2.2 percent that goes into the city’s coffers – but shipments to locales outside the city aren’t subject to the city’s sales tax. Items shipped out of state aren’t, as a rule, subject to any of the 8.6 percent in sales tax.Shipping a pricey watch to one’s out-of-state address is perfectly legal, though shipping costs and insuring the package will eat into the savings in sales tax.Far shadier – and know one knows for sure how often it occurs – is shipping an empty box home and wearing the watch out of the store, or picking out a fur coat, trying it out for a week in Aspen, and then paying for it at the end of your stay and shipping it home. That way, you get to enjoy the coat during your Aspen vacation, but avoid paying sales tax on it. Those kinds of stories reach the ears of the city finance office on occasion.”As far as the empty box syndrome, I don’t know how much that happens,” said Mayor Helen Klanderud.She witnessed it once though, years ago, when a friend bought an expensive watch at a downtown shop. The clerk suggested mailing an empty box to an out-of-state relative, since the buyer lived in Aspen, according to Klanderud, who was a county commissioner at the time.”I said, ‘No, you can’t do that.'””Any place where you have consumptive-based taxes in a resort community, you’re going to have leakage,” said Paul Menter, city finance director.He, too, has witnessed a questionable sale. Menter’s wife was eyeing a $180 item that the sales clerk offered to sell her for $129 if she paid cash. Menter said he gave his wife $140; she got $11 change and no receipt. Sales tax on the item should have upped the price to about $140.”One experience is not statistically valid proof that there’s a problem, but I think there probably is a lot of underground economic activity in this community,” Menter said. “I don’t think there’s anybody in City Hall that would deny that goes on.” The completely legitimate shipping of purchases, however, takes a big chunk of what would otherwise be taxable sales.Last February was a record month of retail sales in Aspen. Total taxable sales in February topped $44.7 million – the best February ever – according to the finance office. Gross sales were even better, exceeding $69.7 million. In other words, nearly $25 million in sales went untaxed.The town’s jewelry stores did $2.2 million worth of business in February. The taxable sales amounted to $507,879, according to the city’s finance records. Most of the balance was in nontaxable sales – items shipped out of Aspen.Local galleries recorded $916,346 worth of business in February; taxable sales totaled $85,338.Despite the plethora of both jewelry stores and art galleries in Aspen, taxable sales from those two sectors of the local economy amounted to less than 2 percent of the resort’s total taxable sales for the first five months of this year.On the other hand, Aspen probably loses very little in sales tax from the two biggest segments of the economy – tourist accommodations and restaurant/bar business. Those products are consumed on the spot. No one ships home a fancy dinner.Jewelry, small enough to be worn on a plane or carried home in one’s luggage, is nonetheless frequently shipped out, confirmed clerks at a couple of Aspen’s high-end jewelry stores. Shoppers are looking to avoid the sales tax.The Pismo Fine Art Glass gallery also ships most of its products, according to manager Isabelle Loeb, but much of its glass works would be rather unwieldy to carry. And some are quite weighty.”I mean, look at the size of these things,” she said.Customers do take smaller items with them, however. A parcel behind the counter at Pismo awaited a buyer who chose to pay the sales tax and carry her purchase home with her on the plane, rather than having it shipped.Never, Loeb said, has she been asked to ship an empty package. “And if I was, I would not do that,” she said.A former local gallery manager, however, said she heard that request from customers – and refused to accommodate them.At Kemo Sabe, Aspen’s purveyor of Western wear, most customers pay the sales tax rather than ship their purchases home, even though a pair of cowboy boots can run more than $2,000, said manager Colleen Tuohy.”People want to wear their boots and Stetsons out of the store. That’s why they’re here,” she said.At McHugh Antiques, owners John and Ricki McHugh have long advocated some sort of city charge on shipped items, perhaps dedicated to a particular local purpose. “It could be minimal – 1.5 percent,” John McHugh said. “It wouldn’t, we don’t think, turn people off from buying things.”Janet Urquhart’s e-mail address is email@example.com
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