Inflation drives Colorado Springs' record high sales tax collection, modest increase from 2022

Jessica Van Dyne, The Gazette (Colorado Springs, Colo.)
·2 min read

Feb. 17—Colorado Springs city sales tax collections saw a slight, year-over-year bump in January, but the increase still was enough to boost monthly revenues to a record high.

January's sales tax revenues, which reflect retail activity mostly in December, rose 1.38% from January 2022, according to a report this week from the Colorado Springs Finance Department.

The percentage increase was far below the recent peak of 60.75% in May 2021; sales tax gains were mostly in double-digit territory for much of that year and through the beginning of 2022.

Recent single-digit percentage gains in sales tax revenues aren't a concern, said Charae McDaniel, Colorado Springs' chief financial officer. The city planned for a shallow recession later in 2023.

"At this point, it does not cause any alarm for the city because we have planned for that," McDaniel said.

"We have very good reserves, and we will be able to get through what we hear is being projected."

Despite the relatively small percentage increase, the city collected a record high $23.3 million in sales tax revenue in January, the report found. Inflation, population growth as well and revenues from online purchases, which began in Colorado Springs a little over a year ago, also contributed to the record high month of collections.

Restaurants experienced the largest percentage increase in sales tax collections at 16.85%, followed by miscellaneous retail at 11.11% and utilities at 7.75%.

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Business services saw the largest percentage decrease in sales tax collections at 55.48%. Medical marijuana revenues fell 26.88%, while auto repair and leases dropped 16.41%.

Revenue from the city's 2% sales tax is a key economic indicator and the biggest funding source for city government, accounting for more than half of spending on public safety, roads, parks and other services.

If the city saw double-digit decreases in sales tax that would warrant additional action to keep up with spending, but McDaniel said the city doesn't expect to see such declines.

Special taxes for public safety, roads, parks, open space and trails generated nearly $13.1 million in January.

Collections from the city's use tax, levied on items businesses purchase from outside the Springs for use inside city limits, climbed 23.61% in January from a year earlier.

McDaniel said that was largely due to the commercial construction industry building multifamily housing projects.

Revenue from the city's tax on hotel rooms and rental cars also jumped up 1.49% from January 2022 with $513,245.

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