Unlocking Avon: How the New Construction Materials Tax Affects You!

On November 5th, a transformative decision was made by the voters of Avon as they approved a 4% use tax on construction materials. This pivotal moment marks a significant shift, occurring 22 years after a similar proposal was rejected by the very same community, and just a year after a nearly identical measure fell short at the ballot box.

So, what drove this sudden change in public sentiment? And how will this new tax impact the town as it rolls out this winter?

Understanding the Use Tax

This 4% use tax specifically targets construction materials. While Avon already imposes a 4% sales tax on these materials, town officials have noted that the area has consistently missed out on valuable sales tax revenue whenever construction supplies are purchased from outside the town limits.

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“We estimate that this use tax could boost our revenues substantially—by about 45% to almost 50%,” shared Eric Heil, Avon’s town manager, during a council meeting in August.

By implementing a use tax, Avon aims to streamline the collection process, allowing for more efficient tracking of taxes related to construction projects while keeping costs stable for contractors and builders.

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As of November 21, the use tax ballot measure gained traction with 1,156 votes in favor (53%) against 1,019 votes opposing it (47%). This new tax will officially come into effect on January 1st.

How is the Use Tax Implemented?

The use tax will be collected when a building permit is issued for a project. It is calculated based on 50% of the total construction value. If the total materials purchased fall below the taxed amount, Avon has a reconciliation process to refund any overpaid taxes.

Those who pay this 4% use tax will be exempt from paying the local sales tax (up to 4%), including Avon’s own sales tax. However, county and state sales taxes will still apply.

When paying the use tax, builders will receive a certificate from the town which they can then present to construction materials vendors. This certificate ensures they won’t have to pay up to 4% in municipal sales taxes at places like Home Depot or Lowe’s in Silverthorne, according to Heil.

Additionally, home improvement projects in Avon that utilize less than $125,000 worth of building materials over a three-year period will be exempt from the use tax. This exemption is tracked through the building permits issued for each property.

“Whether it’s a cozy gazebo or a grand hotel project, if the materials are under the exemption cap, they will be exempt!” Heil explained. This three-year window is designed to prevent any manipulation of the tax breaks by staggering construction timelines.

While exemptions apply, builders purchasing materials at retailers will still pay sales tax, but they won’t incur the use tax if those materials are delivered directly to their job site—an increasingly common scenario.

Avon will also grant use tax exemptions to organizations that are already sales tax-exempt, such as government entities, charitable organizations, and public schools.

Although the necessary filing and payment documentation for this tax isn’t finalized yet, town staff is diligently preparing the needed forms ahead of the January 1 start date.

Where Will the Funds Go?

Every dollar collected from the use tax will funnel into Avon’s community housing fund. This fund is vital for supporting those who struggle to afford market-rate housing, including local workers, seniors, retirees, and individuals with disabilities.

The town’s community housing initiatives range from the Mi Casa homebuyer assistance program to new capital projects aimed at increasing community housing availability.

Heil and the town’s chief finance officer, Paul Redmond, projected that the use tax could generate around $500,000 annually in revenue, compared to the $300,000 generated currently through the sales tax on construction materials.

Why did voters embrace the use tax this year?

This ballot was the third attempt by Avon to introduce a use tax on construction materials. Neighboring towns like Vail, Minturn, and Eagle have already implemented similar taxes ranging from 3% to 4%.

The first attempt dates back to 2002 when the proposal was defeated with 573 votes against and 379 in favor. Just last year, a comparable question faced rejection by 60% of voters.

This year’s successful ballot featured a higher exemption threshold of $125,000 and earmarked funding specifically for community housing. Notably, the town made a concerted effort to educate the public about how the tax operates—through articles, a dedicated website, and informative mailers sent to residents. This proactive communication strategy was based on polling that indicated better-informed voters were more likely to support the measure.