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Council Considers City Sales Tax Collection Change

September 1, 2025

On Aug. 26, Gunnison City Council discussed changing how the City of Gunnison’s sales tax is collected from local businesses. Council expressed support for shifting collection from the City to the State of Colorado — a move that could reduce complexity for businesses, save staff resources, and free up revenue for economic development.

Currently, the City collects its own sales tax, a practice that began years ago when Colorado charged municipalities a 2% collection fee that nearly tripled Gunnison’s internal costs. With that state fee now eliminated, council is weighing whether to transition to the State’s Sales & Use Tax System (SUTS). The shift would allow businesses to file through a single statewide portal and reduce demands on City staff.

Another key consideration is the City’s vendor service fee. Gunnison currently offers a 4% vendor fee — the highest in Colorado — allowing businesses to retain a portion of the City sales tax they collect if they file on time. Other municipalities have already moved to reduce or eliminate this incentive. If Gunnison follows suit, the City could redirect nearly $400,000 annually toward local economic priorities, such as helping launch a new Economic Development Corporation.

The City’s Economic Development Strategic Plan calls for creating an EDC as an independent, nonprofit public–private partnership. The EDC would not be a City department but a collaborative entity governed by a board with representation from local institutions such as the Chamber of Commerce, Western Colorado University, Gunnison Valley Health, and the City itself. Its work would be focused on small business support, workforce development, business retention and expansion, and downtown revitalization.

Council voiced support for both transitioning to State collection and reducing or eliminating the vendor fee. City staff have been directed to prepare options, which will return to council for further discussion and possible adoption in the coming months.

City officials emphasized that the current discussion does not raise the City sales tax rate. The rate remains the same. The proposals under consideration only affect how the City’s sales tax is collected and whether businesses retain the 4% vendor service fee. Any funds redirected to the City are proposed to be used for communitywide economic development efforts, including the creation of the EDC. No changes take effect immediately. New policies would require formal ordinances, public hearings, and council approval before implementation.