Colorado Legislative Council Staff



TABOR Refund Impact

(Replaces Fiscal Note dated January 26, 1998)

General Fund Revenue and Expenditure Impact

Drafting Number:

Prime Sponsor(s):

LLS 98-230

Sen. Arnold

Rep. Reeser


Bill Status:

Fiscal Analyst:

January 29, 1998

Senate Transportation

Scott Nachtrieb (866-4752)



Summary of Legislation

            The bill would allow a person to receive a state sales or use tax refund when purchasing a car within 30 days of selling another car to a private individual. The amount of the refund would be the difference between the sales or use tax imposed on the actual purchase price of the car being purchased and the tax that would have been imposed on the car being sold if the purchaser had exchanged the car as part of a trade in with the dealer. A person would be limited to selling two cars a year and persons engaged in selling automobiles or who are engaged in a retail transaction in which an automobile is exchanged in purchasing another automobile could not apply for the refund. This bill would become effective July 1, 1998.


FY 1998/99

FY 1999/2000

State Revenues

General Fund

Other Fund



State Expenditures

General Fund

Other Fund



FTE Position Change

1.5 FTE*

1.5 FTE*

Local Government Impact — None

* See State Revenues

State Revenues

            The bill would decrease sales and use tax collection to the General Fund. The number of persons that sell a vehicle or two vehicles and purchase another within 30 days from a dealer has not been determined. The value of these vehicles that may be sold within 30 days of a purchase of a vehicle has not been determined. The value of the newly purchased vehicles these people may buy has not been determined. The county clerks offices collect sales and use taxes for vehicles that are not sold through a dealer. The county clerks collected approximately $32.0 million in state motor vehicle sales and use tax revenues in FY 1996-97. Due to the number of motor vehicle transactions that occur annually in this state, the potential fiscal impact could be significant to the General Fund. For purposes of this fiscal note, it is assumed that there would be 50,000 requests for refunds and the average refund would be $200. This would require $10.0 million in General Fund refunds.

            The current practice in the Department of Revenue and the Controller’s office is to subtract sales and use tax refunds from revenues received. For purposes of this fiscal note, it is assumed that these refunds would be treated in the same manner. However, circumstances presented in this bill may be different. It is not clear that these refunds should be treated the same or should be considered General Fund expenditures and subject to the six percent limitation (Arveschoug-Bird) under 24-75-201.1 C.R.S.

TABOR Refund Impact

            Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.

State Expenditures

            The Department of Revenue would have some costs of administering the refunds. The department would develop and distribute a refund request form at a cost of 9.5 cents a form to dealerships, county clerks, and the Internet. This would require some increased mailing costs and additional data entry for returned requests. The department would also experience an increase in microfilming costs and additional phone calls. Approximately 120 hours of computer programming would be completed during the annual review and rewrite of computer programs. It is estimated that the department would require at least $7,600 and 0.3 FTE per 10,000 refunds requested. Should the Department receive 50,000 requests, the DOR would require 1.5 FTE and $37,249 GF. Of that amount, $30,049 would be for personal services, $750 would be operating costs, $3,750 would be for computer programs, and $2,700 would be for capital outlay.

Local Government Impact

            It is assumed that the bill would only apply to state sales and use tax purchases. Local governments would not be impacted.

Spending Authority

            This fiscal note implies that the Department of Revenue would require 1.5 FTE and $37,249 in additional General Fund spending authority for FY 1998-99 to implement this bill.

Departments Contacted       Revenue




 1.         That this refund applies to state sales tax only. The local sales taxes still apply to the car sale.

  2.        That the new vehicle purchased must be done so from a retail car dealership where it could have been possible to trade-in the vehicle.


  3.        That the person requesting the refund must calculate the three percent state sales tax on their own. Any bill of sale will have the total sales tax, including that of the localities. As local taxes are not involved, the seller must calculate the amount of refund themselves.


  4.        That if local taxes are included in the refund, the processing cost to the department will increase significantly.


  5.        That all refunds come out of the General Fund.


  6.        That 50,000 individuals will claim refunds.


  7.        That a new refund request form will have to be developed.


  8.        That the new refund request form and instructions will be distributed via the Internet, the Interactive Voice Response (IVR) system, at County Clerks offices and automobile dealerships.


  9.        That the department will incur costs to print the new form at a cost of $0.095 per form.


10.       That the department will incur costs to mail the forms to individuals requesting them, dealerships and county clerk offices at a cost of $0.30 per form.


11.       That the new form requesting this refund will have to be data entered and require 42 keystrokes per return.


12.       That the department will have to microfilm the new returns at a cost of $0.065 per page.


13.       That the department may require new FTE to process the new returns. Processing 10,000 returns will require 0.3 FTE.


14.       That the department will require 120 hours of contract programming.


15.       That the average refund requested would be $200.