Rio Blanco use tax battle heads to state Supreme Court |

Rio Blanco use tax battle heads to state Supreme Court

Pete Fowler
Glenwood Springs, CO Colorado

GLENWOOD SPRINGS, Colorado ” The Colorado Supreme Court said Monday it will hear a case that could set a precedent for how use tax is imposed on oil and gas companies in Colorado.

Rio Blanco County attorney Kent Borchard was encouraged by the announcement.

“I read it to mean that they disagree with some aspect at least of what the Court of Appeals did,” Borchard said.

At issue is what construction and building materials of industrial facilities may be subject to use tax. The result could determine whether significant amounts of use tax revenue go to cities and counties in Colorado indefinitely into the future.

The legal dispute began over three years ago. ExxonMobil Oil Corp. appealed the county’s tax assessment, won a favorable decision from the Colorado Department of Revenue, and an affirmation of the decision in state district court. Rio Blanco County appealed those decisions and then appealed a July Court of Appeals decision. The appeals court had affirmed the district court’s finding that certain equipment did not fall under a definition of “construction and building materials” and thus was not subject to use tax.

But Borchard said the appeals court also expanded the lower court’s decision too far.

“(The Court of Appeals) expanded the position that ExxonMobil was taking as to the oil and gas equipment they were bringing in to all commercial development,” Borchard said. “That would mean that nobody could impose use tax on commercial buildings, which they always have.”

Borchard said around $6 million in use tax revenues in 2-3 years are at stake for Rio Blanco County, plus an unknown amount of future revenue. The county’s petition to the Supreme Court says “the loss of the use tax revenue from construction of industrial facilities would be a critical blow to the county’s finances.”

“ExxonMobil took the position that county use tax, which is on building materials, doesn’t apply to all of their improvements out there that they feel are not structures,” Borchard said. “They took the position that their $100 million gas processing plant should not be subject to use tax at all.”

An ExxonMobil spokesperson could not be immediately reached. But the Court of Appeals decision said Rio Blanco County gave expanded meaning to the definition of “construction and building materials” subject to use tax to an “unreasonable and unintended degree.”

“The county’s interpretation of ‘construction and building materials’ is so broad that it would tax nearly every item of personal property ” whether or not it was purchased at retail within or outside the county,” the Court of Appeals decision states.

The county believes things like concrete and steel in the ground and other items are clearly construction materials and are subject to use tax. For example, Borchard said, energy companies sometimes bring in huge pre-assembled pieces of a gas processing plant on trucks and claim that it’s equipment not subject to use tax.

Borchard expects that energy companies and Colorado cities and counties are paying attention to the case. He said it’s anybody’s guess as to how much revenues would be lost for counties and cities were the Court of Appeals decision allowed to stand.

The Court of Appeals decision “amounts to a major blow to the fiscal stability of many counties and municipalities throughout the state,” Rio Blanco County’s petition to the Supreme Court says.

Contact Pete Fowler: 384-9121

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