Questions arise over legality of city's sales tax

PONDERAY — Voters approved a five-year, 1-percent local option tax in Sandpoint last year to support improvements at War Memorial Field.

Since then, Ponderay city officials have received several complaints from businesses about being required to charge Sandpoint's 1 percent tax to customers who live in Sandpoint. 

Louis Marshall, city attorney for Ponderay, recently submitted a letter to Sandpoint officials asking if this is the case and, if so, if they could provide legal authority for the practice. Jennifer Stapleton, Sandpoint city administrator, said the city has not yet responded to Marshall's letter, but plan to have a response sometime in the next two weeks.

Ponderay city clerk Su Warren said Sandpoint's tax is a resort city local options sales tax, which is done at the point of sale and Ponderay businesses do not sell in the city of Sandpoint.

"If they did, they would be Sandpoint businesses, not Ponderay businesses," Warren said in an email to the Daily Bee. "Our businesses may deliver to Sandpoint, but they also deliver to many other places."

According to the question and answer document regarding the local option tax on cityofsandpoint.com, the 1 percent sales tax is a point of sale tax which applies to all taxable sales made by retailers within Sandpoint city limits or delivered to an address within city limits.

Warren contacted the Idaho Tax Commission, and according to Marshall's letter, there is some concern over the legality of the practice. Essentially, the tax commission is questioning whether the sales tax is being used as a use tax, according to the letter. Use tax is when a city collects sales tax from outside the city on goods delivered within city limits.

Stapleton said the Idaho Tax Commision's "Doing Business in Idaho" page at tax.idaho.gov/i-1049.cfm could be substituted with "Doing Business in Sandpoint." The state website outlines sales and use tax for Idaho, which requires retailers who do business in Idaho to get a seller's permit and collect sales tax on the goods they ship or deliver to customers in Idaho.

Warren also said some of the Ponderay businesses that deliver to Sandpoint are being required to purchase a Sandpoint business license. She also spoke with the tax commission on that issue and was informed that Ponderay businesses are not required to get a Sandpoint business license.

"Sandpoint is overstepping their boundaries by asking Ponderay businesses to pay Sandpoint's sales tax and then making them get a business licence also is way over the top," Warren said.

Stapleton directed the Daily Bee to Sandpoint City Code, sterlingcodifiers.com/codebook/index.php?book_id=437&chapter_id=18203, which lists the requirements for business licenses in the city:

A. No person shall engage in any business within the city of Sandpoint for which licensing is required by this chapter without having submitted a license application to the city clerk or a designee and receiving a general business license in accordance with the provisions of this chapter. This license shall be in addition to any other license required by other chapters of this title. Such license shall be valid from the date it is issued through December of that same year, so long as the ownership, nature of the business, and location of the business remain unchanged.

B. No person shall engage in any temporary business within the city of Sandpoint for which licensing is required by this chapter without having submitted a temporary business license application to the city clerk or a designee and receiving a temporary business license in accordance with the provisions of this chapter. Such license shall be valid for no more than four days. Persons having a city of Sandpoint general business license are exempt from obtaining a temporary business license when engaging in business at a special event.

C. Upon timely payment of the annual renewal fee, any person registered with the city under the business registration law in effect prior to the effective date hereof will be issued a business license and will continue to receive a license via the renewal process each year thereafter, so long as payment of the annual renewal fee is made in a timely manner.

Mary Malone can be reached by email at mmalone@bonnercountydailybee.com and follow her on Twitter @MaryDailyBee.