Snowmass prefers marketing to lower tax rate
December 2, 2008
SNOWMASS VILLAGE ” Snowmass Village retailer Barbara Bakios-Wickes doesn’t think residents and guests will drive elsewhere to buy goods when the town’s sales tax rises beyond 10 percent.
The manager of Sundance Liquor and Gifts pointed out that increasing sales tax from 9.9 percent to 10.4 percent only adds two cents to the tax on a $5 purchase.
Other town merchants may well hope she is right, as the Snowmass Village Town Council decided Monday night against tampering with its new 10.4 percent town sales tax.
That tax rate will be one of the highest among local resort towns, though it will be matched by at least one other town ” Telluride. Aspen’s sales tax, for example, is 8.6 percent.
Considering cutting its sales tax below the 10 percent threshold, the council had eyed its 2.5 percent marketing tax. Cutting the tax by 0.5 percent would have lowered the overall sales tax to 9.9 percent but decreased Snowmass’s marketing budget by an estimated $800,000, to $1.4 million, depending on 2009 revenue.
Councilman Reed Lewis, who also owns The Daly Bottle Shop, voiced the strongest opposition to the 10.4 percent sales tax, arguing that the 10 percent threshold was a more important issue than the lost marketing dollars.
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“Maybe it’s time to realize some efficiencies and get smarter with every dollar,” he said to Susan Hamley, director of the Snowmass Tourism Office.
But Hamley argued that marketing dollars should never be cut in a recession.
She said that Breckenridge recently pulled $250,000 from its reserves for additional marketing after a study showed it could lose $38 million in sales this year. Vail, she said, backing up her claims with newspaper articles, pumped an additional $500,000 into its marketing campaign this year.
Bob Purvis, a local resident and vice chair of the marketing, special events and group sales board, argued that in 2002 the town had paid for a study that showed marketing efforts would only be effective if at least $2.5 million was spent each year. Adjusted for inflation, he said, that number is now $3 million ” and a 0.5 percent tax cut could drop the program’s funding below effective levels.
John Quigley, senior vice president of The Silvertree Hotel and chair of the marketing board, also was against cutting the marketing budget in order to lower sales tax. He countered Councilman Reed Lewis’s claims that consumers will go elsewhere, saying he has always been able to convince conference groups to pay Snowmass’ 12.3 percent tax on lodging.
Councilman Arnie Mordkin took the practical route, wondering if there had been a study proving that consumers go elsewhere when sales taxes exceed 10 percent.
“What is the probable loss in overall tax by the customer not purchasing in Snowmass?” he asked.
From a purely mathematical perspective, he noted that the town would have to be at risk of losing roughly $1 million in sales tax revenue from the lost sales before lowering the tax would make financial sense for the town.
Ultimately, Mordkin laid part of the blame for Snowmass’ high sales tax on the 3.5 (soon to be 3.6) percent Pitkin County sales tax. Telluride shoppers, he noted, only pay a 1 percent county sales tax ” as do shoppers in Glenwood Springs and Steamboat.
“Could somebody with time on their hands take this up as their issue?” asked Lewis.
Meanwhile, over in Base Village’s newly opened Generation Snowmass store, manager Marija Siamenkovska, tidying up the store at the end of the day, said she understood council’s dilemma.
Being taxed beyond the 10 percent threshold will matter to consumers, she said. Most will pay it, she said, but they may not be happy about it ” and a few may not return.
But Siamenkovska was equally willing to praise the “brilliant marketing” that brought consumers into her store on the first few days it was open.
“I understand that taxes are something that put fuel in what we do,” she said.