Colorado Department of Revenue SALES TAX CHANGES EFFECTIVE December 1, 2018.
FOR IN-STATE RETAILERS
Effective December 1, 2018, the Colorado Department of Revenue will adopt new sales tax rules. The new rules state sales tax must be collected and remitted based on the jurisdiction’s tax rate at the point of delivery for the taxable good when taxable goods are delivered to a Colorado address outside the retailer’s jurisdiction. This includes any applicable state-administered local and special district taxes. For example, if a retailer delivers taxable goods to a customer’s address, which is outside the jurisdiction of the retailer, sales tax must now be collected at the rate effective for the customer’s address, not the taxes that are in common between the customer’s address and the seller’s location, as was the case previously. Jurisdiction refers to Colorado, the town or city, special district, and county with respect to sales taxes to collect and remit.
FOR OUT-OF-STATE RETAILERS
A U.S. Supreme Court decision on June 21, 2018 (South Dakota vs. Wayfair, Inc., “Wayfair Case”) struck down the requirement a retailer must have “physical presence” in a state to be subject to state sales and use tax registration and collection requirements. Sales tax regulations requirements apply to any retailer that is “doing business in Colorado’ and has “substantial nexus” with the state. Out-of-state retailers with substantial nexus have one of the following: 1) a physical presence in Colorado; 2) $100,000 or more in gross sales into Colorado in the current or previous calendar year; or 3) 200 or more transactions into Colorado in the current or previous calendar year. Be sure to read the FAQ’s published by the Colorado Department of Revenue for Out-of-State Retailers.
- For additional information on these changes visit the Colorado Department of Revenue
- Non-physical locations only require a return to be filed when there are sales actively made in that tax jurisdiction for that filing period.
- Physical locations always require a tax return to be filed, even when there are no sales for that month.
- As of the date of this article, Colorado has offered a grace period through March 31, 2019, to be compliant with the changes.
Whereas, the above information pertains to sales tax collection within the state of Colorado, the Wayfair Case has created a huge shift for “out of state” online retailers to begin collecting sales taxes and the application of the Due Process Clause of the Fifth and Fourteenth Amendments of the U.S. Constitution. In particular the Supreme Court, through the Wayfair Case concluded “the sale of goods or services has a sufficient nexus to the State in which the sale is consummated to be treated as a local transaction taxable by that State” and “Modern e-commerce does not align analytically with a test that relies on the sort of physical presence defined in Quill”.
Whereas this article addresses businesses collecting sales taxes from its customers, as a reminder to you, most states today have a line on their respective state individual income tax returns, for unpaid sales (i.e., use taxes) that you as an individual must report if applicable. Often, these states also allow for a “safe harbor” calculation based on gross income to report the use tax to the resident state of an individual. Think about all the Amazon deliveries you have without state sales tax; you are personally responsible for reporting the use taxes due to your state!
Forward this PDF to any of your friends, colleagues or other business associates as this information applies to many businesses today. If you have any questions, comments or concerns with the above information, please do not hesitate to contact Adam Allan or Linda Heyburn or 303-792-9445.