Council May Slash Pull-Tab Tax City Would Lose $300,000 Under Plan To Charge Businesses On Profits, Not Sales

A push to lower the tax on pull-tab games may well win the support of the Spokane City Council, but it means the city will lose about $300,000 in annual revenues.

Council members tonight will consider a proposal to slash the tax on businesses that sell pull-tabs, doing away with a system that taxes everything they sell and replacing it with a tax on their profits alone.

Councilman Jeff Colliton, who lobbied for the tax reduction, plans to vote for it even though he works for a pull-tab company.

The change would affect only for-profit gambling houses. Last year, a new state law forced cities and counties to reduce the tax on nonprofits groups.

Currently, a for-profit business that sells $1,000 worth of the hand-held paper gambling games must pay a 5 percent tax on total sales. That same business may have paid out $880 in winnings out of that $1,000.

The proposed change means the business would pay taxes only on $120 - the profit - but at a higher rate of 10 percent.

That way, business owners can deduct their losses, Colliton said.

Colliton lobbied for the reduction before the city’s Finance Committee, which is recommending the proposal. Three council members sit on the committee, almost guaranteeing four votes tonight in support of the tax cut.

“If committees recommend something, we generally approve it,” Colliton said.

He is familiar with the pull-tab business. For years, Colliton sold the games as owner of the Park Inn Tavern. Now, he works as a marketing representative for Spokane Pull-Tabs and Bingo Supply Co.

The company won’t benefit from the tax because it distributes pull-tabs to the operators, Colliton said, adding that operators are the only people who pay the tax.

Colliton said he plans to vote on the measure tonight - but only because City Attorney Jim Sloane assured him it wasn’t a conflict of interest.

Sloane said last week that a conflict could arise if there were a direct monetary benefit, such as if a council member would make money by approving a particular contract. “I don’t believe there is a direct benefit here,” he said. “This is just a question of dealing with the amount of tax levied.”

Mayor John Talbott acknowledged that there may be the appearance of a conflict of interest, but because Colliton works in wholesale and not retail, a conflict doesn’t legally exist.

“It’s a personal decision on Colliton’s part to vote,” Talbott said.

Other council members could not be reached for comment.

Slashing the pull-tab tax also means slashing the revenues coming into the city. Paul Tanners, the city’s tax auditor, said reducing the tax would cost the city about $300,000 a year.

Taxes on pull-tabs brought in about $912,000 in 1997. The new formula would reduce that amount to an estimated $500,000 - a drop that includes about $150,000 lost to the tax cut on nonprofit pull-tab businesses.

Under the proposal, collecting the taxes also will be tougher, Tanners said, adding that it’s much easier to audit total sales than total profit.

The advent of Las Vegas-style gambling in Spokane may help offset the dollar loss. Early calculations show taxes on card rooms could top $800,000 by year’s end - a dramatic jump from the $150,000 expected to be collected for 1997, Tanners said.

Taxes are collected quarterly, and last year’s fourth quarter taxes still are being tallied, Tanners said.

, DataTimes MEMO: This sidebar appeared with the story: MEETING A briefing for the council begins at 3:30 p.m. in the lower-level conference room of City Hall, 808 W. Spokane Falls Blvd. The meeting starts at 6.