Construction materials use tax likely heading to Avon ballot this November

News News | Aug 7, 2023

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This week’s Avon Town Council meeting will include the second reading of the proposed construction materials use tax, which passed its first reading two weeks ago.

If this week’s second reading on the topic is approved by council, the topic will go to the Nov. 7, 2023 election ballot. Avon residents will have the final vote on whether a construction materials use tax should be implemented in Avon, which would go into effect beginning in late 2023. The last time a construction materials use tax was seen on the ballot in Avon was in 2002, when it failed to pass by a vote of 573 against the use tax and 379 in favor. Voter polling completed in summer 2022 indicated that the majority of current Avon voters are in favor of a construction materials use tax.

Avon is the only town in Eagle County that does not have a construction materials use tax. Avon’s current 4% sales tax on construction materials matches that of Vail, Minturn, Eagle and Gypsum, towns that all have use taxes as well. The proposed use tax, also of 4%, would match the construction materials use tax percentages of Vail, Minturn and Eagle. Gypsum and Red Cliff both have use taxes of 3%.

At the July 25 first reading of the proposed construction materials use tax, upfront payment of the tax was required for builders to receive a permit to begin construction. This received pushback during the meeting. “It’s going to increase building costs. It’s not because you guys are collecting more money, but if I’m financing a project, and I have to pay the use tax day one, I have to pay interest on that amount,” said former council member and construction company owner Dave Dantas. “If it’s not collected as a use tax, and it’s collected the way you’re doing it now, it trickles in, as you’re buying materials, it’s not due day one. So a little bit of a bump because of that,” he said.

Dantas suggested that the proposed use tax be reduced from 4% to 3%, due to the benefit to Avon of receiving the payment upfront, but town staff made a different change in response to Dantas’ feedback. While for most projects, a building permit will not be issued until the construction materials use tax is paid, an exception will be made for single-family and duplex residential building permits. For these projects, a building permit applicant may request to have the use tax pushed to after construction is completed, at which point payment in full of the use tax will be a requirement of issuance of a certificate of occupancy.

The current proposed ballot question on the construction materials use tax places a cap of $6 million on possible revenue in the first year, though the number exceeds by half the amount town staff expect to earn based on known construction projects. The use tax would only apply to projects receiving over $50,000 of work within a calendar year, with the intention of exempting small projects such as home improvements. The use tax also would not apply to deed-restricted community housing projects within town.

A construction materials use tax is typically easier to collect more consistently, when compared with a sales tax. Builders would be exempted from paying sales tax on materials with proof of payment for the use tax. The use tax is also expected to generate more revenue for Avon than a sales tax, as it would prevent the manipulation of tax rates that can occur with a sales tax.

To make a comment to the Avon Town Council, and/or to hear the decision on the construction use tax and other issues, attend this week’s Avon Town Council meeting, on Zoom and in person, at 5 p.m. on Tuesday, Aug. 8.

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