Construction Use Tax FAQs Reconciliation FAQs
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Reconciliation FAQsPlease view the chart on the main Construction Use Tax homepage to find the reconciliation form and instructions that apply to the date your permit was issued.
What is reconciliation?Reconciliation is a process performed upon completion of a permitted construction project to determinewhether there was an overpayment or underpayment of Construction Use Tax.
When is reconciliation required?Reconciliation is required for construction projects where the final contract price or final project cost is $20,000 or more. Please refer to this Reconciliation Chart with Links to Forms and Instructions on the Construction and Use Tax homepage.
Why reconcile?Because the use tax prepaid at the beginning of a project is an estimate, reconciliation is required to determine if the pre-payment was accurate. Additionally, because many projects have change orders, reconciliation is necessary to report tax on the additional purchases related to these changes.
Who completes the reconciliation?After completing a permitted construction project where the use tax pre-payment option is used, the general contractor or homeowner acting in the capacity of a contractor is the person responsible for completing the Construction Project Cost Reconciliation Return to determine if the use tax due the city is more or less than the prepaid tax estimate. However, reconciliation is not required for construction projects where the final contract priceand final project cost is less than $20,000.
When is the reconciliation submitted to the Boulder Finance Department?When additional taxes are owed, the person responsible for the permit has 90 days from the certificate of occupancy or project completion date to complete the reconciliation and pay all additional taxes due. Penalty and interest charges as provided under B.R.C. 3-2-22 will be imposed on taxes due that are paid after the 90 day period.
What reconciliation options are available for permits issued between June 30, 2009 and June 30, 2010?Reconciliation of permits issued between June 30, 2009 and June 30, 2010 is optional. Two Construction Use Tax reconciliation methods, as described below, are available to contractors doing work for a contracted price – The 50/50 Short Method and the Actual Method. When homeowners pull a permit to work on their own home and there is no contract price, the actual method is required. In both methods, the total taxable cost of construction must be determined. Once the total taxable cost is determined, the city and county combined tax rate of 4.06 percent is applied to determine total tax due. Then, this amount is compared to the total city and county tax prepaid as an estimate on the permit to determine if there was an under or over payment of taxes. Total taxable cost of construction is determined as follows:
*The total actual taxable costs of construction is the total combined actual purchase price of all materials, taxable rentals and tangible personal property used to complete the project. These amounts are derived from the general contractor's final job cost records and/or purchase and rental invoices. When subcontractors are used, their taxable construction costs must be obtained through signed affidavits and added to the general contractor's taxable costs.
What reconciliation options are available for permits issued on or after July 1, 2010?Permits issued on or after July 1, 2010 are required to reconcile when the final contract price or total project cost is $20,000 or more. Two Construction Use Tax reconciliation methods, as described below, are available to contractors doing work for a contracted price – The 48/52 Short Method and the Actual Method. When homeowners pull a permit to work on their own home and there is no contract price, the actual method is required. In both methods, the total taxable cost of construction must be determined. Once the total taxable cost is determined, the city and county combined tax rate of 4.06 percent is applied to determine total tax due. Then, this amount is compared to the total city and county tax paid on the permit to determine if there was an under or over payment of taxes. Total taxable cost of construction is determined as follows:
*The total actual taxable costs of construction is the total combined actual purchase price of all materials, taxable rentals and tangible personal property used to complete the project. These amounts are derived from the general contractor's final job cost records and/or purchase and rental invoices. When subcontractors are used, their taxable construction costs must be obtained through signed affidavits and added to the general contractor's taxable costs.
What happens if I am issued a permit on or after July 1, 2010 and I do not file the project reconciliation?Projects issued a permit on or after July 1, 2010 for which the city does not receive a reconciliation return are placed on a pending review list. These projects may be reviewed or audited up to 36 months from the city established completion date. The city established completion date is whichever date is latest and includes the date of the certificate of occupancy, letter of completion, final inspection or city established project completion status. Penalty and interest will be imposed on any taxes due. However, reconciliation is not required for construction projects where the final contract priceand total project cost is less than $20,000. These projects will not be subject to the city's audit authority.
What is the deadline for submitting a timely reconciliation?For permits issued on or after July 1, 2010, where the final contract price or total project cost is $20,000 or more, you must submit a reconciliation to the Boulder Finance Department within 90 days of the project's city established completion date to be on time and avoid penalty and interest charges if additional taxes are owed. The city established completion date is whichever is latest and includes the date of the certificate of occupancy, letter of completion, final inspection or city established project completion status.
What are the benefits of on time reconciliation of permits issued on or after July 1, 2010?One of the objectives the city accepted in the process improvement project was to achieve a method for projects to be closed within a timely manner. Changes have been made to the reconciliation process to achieve timely closure for the majority of projects. Reconciliations filed on time will be reviewed for reasonableness, accuracy and completeness. Some will be selected for further review, but the majority will be closed and removed from the pending review list. When filed on time and given a "CLOSED" status the project is deemed to have satisfied all tax obligations and no further action, requirements, or city activity will occur. Except in cases of fraud or intent to evade taxes, reconciliations receiving a "CLOSED" status are not subject to the normal 3-year period in which the city can open a review or audit. Furthermore, penalty and interest will not apply to reconciliations that have been timely and accurately filed and resolved through payment of additional taxes or refund of overpayments. Reconciliation is not required for construction projects where the final contract priceand total project cost is less than $20,000. What happens when I submit my reconciliation?When filing a reconciliation form, if you would like an update on the status, you may provide an email address with the reconciliation. Finance Department staff will examine your reconciliation and contact you if there are questions. If there is money owed to the city, and payment of taxes is resolved, then the status will change to "CLOSED." If there is a refund owed to you, then a check will be processed and the status will change to "CLOSED." When an email address has been provided on the reconciliation, an email will be sent notifying you of the "CLOSED" status. If a project reconciliation return has been filed within 90 days from the completion date, 270 days have passed from the project completion date, and the city has not notified you that they have questions about your reconciliation submission, then the reconciliation will automatically receive a "CLOSED" status.
What types of questions might Finance have about my reconciliation submission?Questions on reconciliations may involve clarification on documents submitted, a request for additional documentation, resolution of a calculation or other follow-up as needed.
What happens if the questions are resolved?If questions are resolved, and payment or refund achieved, then the reconciliation will receive a "CLOSED" status.
What does a "CLOSED" status from the Boulder Finance Department mean?A "CLOSED" status means all tax obligations have been satisfied. Except in cases of fraud or intent to evade taxes, reconciliations receiving a "CLOSED" status are not subject to the normal three-year period in which the city can open a review or audit. The project is "CLOSED".
What happens if the Finance Department's questions about my reconciliation remain unresolved?If Finance Department staff is unable to resolve open questions with the contractor or homeowner, Finance Department staff will notify the general contractor that a review or audit may be necessary.
How long does Finance have to notify me that a review or audit may occur?When a project reconciliation return has been filed with the city, Finance Department staff will notify you of its intent to review or audit the project within 270 days from the certificate of occupancy or "project complete" status date. Otherwise, the project will move to a "CLOSED" status. If a reconciliation is not filed, notification of review or audit can be any time within three years from the certificate of occupancy or "project complete" status date.
Has the city taken steps to improve the reconciliation process?The city developed the reconciliation chart to clarify the expectations to reconcile based upon the date the permit was issued. The reconciliation form has been updated to improve ease of use. The 60-day reconciliation requirement has been expanded to 90 days. Contractors and homeowners who believe that they are underpaying taxes on the permit because the valuation is lower than the expected completion cost have the option to voluntarily pay additional use tax through the life of the project without increasing permit fees. To do this, simply request that the permit specialist add an additional specified amount of tax at any time during the life of the project. The city has exempted projects from the reconciliation requirement when the final contract priceand final project cost is less than $20,000. Projects where the final contract priceand final project cost is less than $20,000 will not be audited. Permits issued on or after July 1, 2010, that are eligible to use the Short Method to reconcile the final project cost benefit from the implementation of a 2 percent reduction in the taxable amount. This change allows contractors choosing the Short Method option to file reconciliations using a 48/52 ratio where the taxable materials amount is based on 48 percent of the total final contract price billed to the customer rather than the previous 50 percent. Last Updated on Wednesday, 25 July 2012 09:24 |
