City staff proposes ending 1% vendor rebate to help close budget gap; council signals support

Deputy City Manager Jason Lovelund presented a proposal to eliminate the city’s 1% vendor fee — a processing rebate vendors keep when they remit sales tax on time — arguing that advances in electronic remittance have reduced the administrative burden that originally justified the rebate.

Lovelund estimated the change would generate "an additional roughly ... $300,000" in annual revenue for the city and noted some jurisdictions cap rebate amounts while many have repealed or reduced the incentive. Council members asked whether a change would drive businesses away or disproportionately affect large retailers; staff said the effect is most pronounced for larger remitters and that Thornton caps its rebate at $25.

Council members signaled support for staff to draft an ordinance and bring it forward for first reading; no final legislative action was taken at the study session.

Staff said the finance committee had reviewed the option and that eliminating or capping the rebate is a reasonable tool to consider when closing budget gaps; if council pursues the change staff will return with draft ordinance language and revenue projections.