Garfield County protests state sales tax withholding
Garfield County should not be liable for several million dollars in sales taxes that have been withheld by the state of Colorado over the last three years as part of court settlement with Noble Energy, because the county was not party to that lawsuit, according to County Attorney Frank Hutfless.
“If we had been party to the lawsuit, we would have taken it up to the Supreme Court,” Hutfless advised the county commissioners Monday, saying he didn’t agree with a 2010 Colorado appeals court ruling supporting Noble’s claim that it overpaid sales taxes on materials used for hydraulic fracturing operations.
That ruling has resulted in about $2.8 million, some of which had already been distributed to local taxing entities, including the Garfield County Public Library District and municipalities in western Garfield County, being refunded or withheld.
The county is also still on the hook for pending claims totaling another $2.3 million or so, according to figures provided by the Colorado Department of Revenue.
County commissioners directed Hutfless to make a case to state officials, including Gov. John Hickenlooper and area state legislators, that the county is due a refund of money paid as part of the settlement to date.
“This was a judgment against the state, not Garfield County,” Hutfless said. “There is no law compelling us to pay on a state judgment.”
Last fall, county officials and representatives from the library district and the Garfield County Communications Authority, which also receives most of its funding from sales taxes, asked Department of Revenue officials to explain the reasons for the ongoing withholding.
“The response was less than adequate to answer all of our questions,” Garfield County Treasurer Georgia Chamberlain said at the Monday meeting.
Hutfless said the county relied on the state’s interpretation that fracking materials were taxable.
“The real issue is who is bound by this judgment,” he said, arguing it was the state’s interpretation that led to the overpayment.
“Nevertheless, we were precluded from making an argument to the Supreme Court on this,” Hutfless said.
Commissioners agreed to use the county general fund to assist taxing entities with the initial refund in 2011, but the state has continued to withhold tax distributions in ensuing years as it continues to pay off the settlement.
That has had an adverse impact on sales-tax-dependent entities such as the library district, which has had to dip into its reserve funds to cover its budget, absent those tax revenues, according to library district Director Amelia Shelley.
Department of Revenue officials did indicate in an October 2013 meeting with county representatives that it could make revenue distributions more predictable in the future, so that taxing entities can plan their budgets, Chamberlain said.
Department officials also suggested that the county could seek to overturn the Noble decision by seeking legislation to identify fracking materials as “tangible personal property,” subject to sales tax, Chamberlain also advised the commissioners.
Other legislative remedies were also suggested, she said.
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