Castle Pines fights for its own ZIP code, USPS disagrees

Sales taxes, other issues cited

Nina Joss
njoss@coloradocommunitymedia.com
Posted 8/30/22

In many communities across the U.S., ZIP codes are a mark of identity. But in others, they are a source of confusion and consternation.

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Castle Pines fights for its own ZIP code, USPS disagrees

Sales taxes, other issues cited

Posted

Type “ZIP code” into the search bar on the online marketplace Etsy, and over 90,000 results will appear. Pillows, t-shirts, keychains and wine glasses on the webpage flaunt placeholder five-digit codes, waiting to be personalized to showcase any patron’s geographic location with pride.

In many communities across the U.S., ZIP codes are a mark of identity. But in others, they are a source of confusion and consternation.

Since 2018, the City of Castle Pines has been attempting to change its ZIP code. Castle Pines, which incorporated in 2008, sits across two different ZIP code boundary areas: 80108, which expands into neighboring Castle Rock and Parker, and 80134, which is also shared with Parker.

ZIP codes, or Zone Improvement Plan codes, were invented in 1963 by the U.S. Postal Service as part of a system to improve the speed of mail delivery, according to the Library of Congress. Since then, the use of ZIP codes has expanded into areas far beyond mail delivery.

Lost sales tax revenue

Because Castle Pines’ ZIP codes overlap local jurisdictions, figuring out where to remit local sales taxes can be confusing for retailers, said City Manager Michael Penny. This confusion arises from the fact that ZIP codes determine the city used in an address, according to a 2021 letter from Castle Pines to the USPS

“Even if a home or business is within Castle Pines’ city limits, its mailing address may appear to be in a neighboring city,” the letter said.

“When someone wants to buy from Amazon and they type their address in for their mailing address and it comes up and says ‘Castle Rock’ not ‘Castle Pines,’ you immediately have that confusion of where that sales tax needs to be remitted to,” said Mayor Tracy Engerman. “If we had our own ZIP code… it immediately then tells the retailer that they need to submit the sales tax to Castle Pines regardless of if it says ‘Castle Rock’ as the city on their address.”

Sales taxes are important because they are the main source of revenue for the city, former Mayor Tera Radloff said.

Especially for a city with a small business district like Castle Pines, losing out on even a small amount takes a big hit to the city’s overall revenue, Engerman said.

“At the end of the day…the money that should be remitted for sales tax dollars is Castle Pines’. We’re not asking for more money or…someone else's money,” she said. “This is ours. And we're just asking for a way to help make it easier for us to collect it.”

In 2020, Castle Pines became a self-collected home rule city, according to its website. “Home rule” cities in Colorado have more powers than “statutory” cities do, including the option to collect their own local sales taxes, according to the Colorado Department of Revenue website,

In addition to the authority to self-collect, Finance Director Mike Farina said, this new designation gives Castle Pines the ability to analyze sales tax trends more closely to ensure it receives the funds it is owed. It also gives the city the ability to audit businesses more easily, he said.

Farina said an audit of an internet sales provider showed that from Jan. 1, 2019 to Dec. 31, 2021, a total of $10,893.96 in sales tax revenue never made its way to the city.

“Since the ZIP codes are wrong, we attribute an example like that to the addressing system and well-intentioned businesses just remitting to the wrong location,” Penny said.

According to David Rupert, manager of strategic communications for the WestPac area at the Postal Service, ZIP codes are not meant to be used for sales tax purposes.

“We use ZIP codes to sort mail, that’s it,” he said. “Across the U.S., there's 19,000 cities, 16,000 towns and 3,000 counties. So obviously, ZIP codes can't address every one of those.”

In its communications with the Postal Service, Castle Pines acknowledged the gap between the original intent of ZIP codes and the realistic usage of them.

“We, as the city, understand that the ZIP code is not intended to be used for sales tax collection. In fact, retailers should not rely on the ZIP code and they are ultimately responsible for collecting and remitting to the correct jurisdiction. However, it happens,” the 2021 letter stated.

Castle Pines added a Sales Tax Address Lookup tool to the city website in order to help businesses determine if their address is within Castle Pines city limits for taxing purposes as an alternative to using ZIP codes, Farina said.

Other reasons

In addition to the sales tax issue, Castle Pines referenced other concerns related to the ZIP code, including:

  • Automobile insurance rate discrepancies
  • Confusion on where citizens should vote in municipal elections
  • Incorrect jury duty notices
  • Misdirection of emergency service vehicles.

According to officials from South Metro Fire Rescue, Douglas County Sheriff’s Office and the Castle Rock Fire and Rescue Department, ZIP codes and city names do not impact the direction of emergency service vehicles. Instead, these institutions use street addresses and geographic information system, or GIS, data.

“If you call 911, the first question is — ‘What's the address or the location of your emergency?’ and all we're looking for is the street address or the intersection,” said Eric Hurst, public information officer at South Metro Fire Rescue. “But city, county, ZIP code — none of that is included in what we need.”

Although he was not aware of emergency vehicles ever being misdirected due to address confusion, Hurst said residents could be confused about which departments to call for non-emergencies. This situation, however, would be resolved quickly with the provision of a street address from the caller, he said.

Penny said public health data can also be affected by ZIP code confusion.

“Some of the medical services, they might use census tracts, but they also use ZIP codes to make determinations around some of the data tracking and findings that occurred during COVID,” he said. “And it made it hard for the city to understand what was really happening in the community because we got lumped in with other demographic counts.”

Engerman said ZIP codes have also caused issues for business licensing. For example, she said a retailer wanted to open a store in Castle Pines, but an online address search showed the property was in Castle Rock town limits. As a result, the retailer applied for a business license in Castle Rock instead of Castle Pines.

“When they went to open their store, they had major delays because they didn't file the appropriate paperwork in order to get the Castle Pines business license,” Engerman said. “And it all stemmed from the fact that the building’s retail address came up as Castle Rock because it was at 80108.”

In addition, Castle Pines residents can be charged incorrect sales tax rates due to ZIP code confusion, as rates vary city to city, Engerman said. She provided an example of an optometrist in Castle Pines whose ZIP code showed up as Castle Rock when he bought expensive medical equipment for his office. The optometrist had to tell the vendor repeatedly that his business was in Castle Pines and he should not be charged Castle Rock’s higher sales tax rate, Engerman said.

Another concern she cited was that ZIP codes could lead potential homebuyers to misunderstandings about which feeder school their children would attend. Based on ZIP code search results, a family might move to a neighborhood expecting their children to attend a specific school and later learn they must attend a different one, she said.

Despite the many scenarios address confusion can cause, Rupert continued to stress that the USPS does not take responsibility for complications arising from the improper use of ZIP codes.

“There are many entities that use ZIP codes for their own data – vehicle insurance rates, store locators, weather forecasts, online dating, credit card verification, etc.,” Rupert wrote in an email statement. “USPS can’t be responsible for the use of that data.”

Senator John Hickenlooper
Senator John Hickenlooper
Taking it to Congress

When the east side of Castle Pines started to develop, the ZIP code was an issue for the delivery of mail, Penny said.

“The mail carriers who are contractors couldn't find the addresses… I think partially because (the area) had a Castle Rock address. And when they can't find an address, they deliver it to the Castle Rock post office,” he said. “So our residents — especially on the east side, on the new development — they were being forced on a regular basis to drive to Castle Rock.”

In June 2018, Castle Pines worked with the Postal Service to modify the last line of mailing addresses within the city to ensure they all showed up as such, according to a city document explaining the ZIP code situation to state lawmakers. This process is known as “preferred last line,” Penny said.

“We basically sent every single address to the post office and said, ‘This is the correct address in Castle Pines,’” he said.

This process helped the Postal Service get the addresses right in its database, but Penny said it does not fix the sales tax problem because most businesses utilize other resources to look up addresses.

“Back in the day, companies would call the post office and get a copy of their database. But that's not where people get it from,” Penny said. “They get it from online now.”

Penny said there are many databases online that companies use for determining addresses for tax purposes, including Google. Castle Pines worked with Google for months to correct their addresses to show up as Castle Pines, he said, but that was only one of many online address databases.

“And we can't track down all those databases, which is part of the request for a ZIP code,” he said.

If Castle Pines had its own ZIP code, it would be easier to ensure that online databases besides USPS also had the correct information, Penny said.

Castle Pines has submitted two letters to its USPS district managers requesting a ZIP code change, one in 2018 and one in 2021, Penny said. Although the Postal Service’s policy is to respond to ZIP code change requests in 60 days, according to the Congressional Research Service, Castle Pines has received no official response to its requests, Penny said.

Rupert said he personally was not aware of these letters, but that a ZIP code change request of this nature would not be approved. The Postal Service only changes ZIP codes when a population grows to such an extent that a new ZIP code is needed, he said.

“But that's really the only time we do it, as for operational needs,” he said. “So we would encourage (Castle Pines) to seek other methods to resolve their tax situations.”

Penny said the city is looking for other solutions by working with elected officials to introduce a bill to the U.S. Congress that directs the Postal Service to designate a single, unique ZIP code for Castle Pines.

The Castle Pines Community Act was introduced in the U.S. House of Representatives on May 25, 2021 with sponsorship from Rep. Ken Buck of district 4. Senators John Hickenlooper and Michael Bennett also support the bill, Penny said.

The bill was previously introduced to Congress in 2020, but did not move past the first stage of the process, according to the U.S. Congress website.

There are currently nine similar bills pending in the U.S. House of Representatives, requesting ZIP code changes to 13 communities across the nation, according to the U.S. Congress website.

After the upcoming November elections, Engerman said Castle Pines is hoping to create a coalition with other communities nationwide that are facing the same issue.

Penny said the bill has been difficult to move forward because the U.S. Congress has other significant undertakings to focus on and because the Postal Service, a large lobbying group and a part of the U.S. government, opposes the measure.

In addition to support from state representatives, Castle Pines has also garnered support from the Douglas County Commission and the mayors of Castle Rock, Parker and Lone Tree.

Divided by Interstate 25, officials believe Castle Pines would have more of a sense of community if it were united by one ZIP code.
Divided by Interstate 25, officials believe Castle Pines would have more of a sense of community if it were united by one ZIP code.
Going forward

In addition to the financial and logistical benefits of having a unique ZIP code, Radloff said having one would increase the sense of community in Castle Pines, especially since I-25 physically divides the city.

“Getting that connectivity and that connection between our two sides of our city and making it feel more of a community was one of our other reasons that we were interested in doing this,” she said.

Penny agrees that a unique ZIP code would unite the community but recognizes why the Postal Service is not motivated to grant the city’s request.

“If everybody wanted their own ZIP code, you know, it'd be a massive shake of the of the mail delivery system,” he said.

Although the Postal Service does not support ZIP code changes in situations like that of Castle Pines, Rupert said that his institution supports the community.

“We’ve been with Castle Pines (since) before they were Castle Pines, you know, so we've grown with that community,” he said. “Regardless of what number is associated with that community, we’re with them. We've always been with them. And they'll continue to get their mail. That's what we're in the business of.”

The process to change Castle Pines’ ZIP code has been long and frustrating so far, but Engerman says the city is not giving up yet.

“We’re gonna keep trying because it certainly has a great impact on our community, and we would like to see it happen,” she said. “At this point, it's still worth giving the effort. We haven't tried every avenue yet to make it happen. So…it doesn't, in my opinion, seem like we should give up.”

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