Under the old sales tax rules, a Colorado business that shipped a product within the state had to collect sales taxes only for the tax regions that overlapped between buyer and seller. In layman’s terms, if you shipped from Denver to Denver, you had to collect all of the relevant sales taxes for Denver. If you shipped from Denver to Vail, you had to collect only the taxes that both areas have in common, the state rate.
New rules state that 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, 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.
A business has to collect sales taxes based on where the good is shipped. The problem is that there are so many different governments that collect sales taxes that complying is a bureaucratic nightmare.
The United States Supreme Court, on June 21, 2018, decided South Dakota v. Wayfair, Inc., et al., overruling two previous Supreme Court cases that upheld the rule that a state could not require an out-of-state retailer to collect sales tax if the retailer lacked a physical presence in the state. Because of the Wayfair decision, states can require retailers without a physical presence in a state to collect sales tax on purchases made by in-state customers so long as the sales tax system in the state is not too burdensome for the out-of-state retailer.
Two bills have been proposed in the state legislature to ease the burden of sales tax rules on Colorado retailers.
SB19-006 (A. Williams (D) | Kraft-Tharp (D) & Van Winkle (R) – Electronic Sales and Use Tax Simplification System: This bill directs the Department of Revenue to source a searchable online database of state and local sales and use tax rates and definitions and to process returns and payments through the system. Home rule cities are encouraged to participate in the system.
SB19-130 (Gardner (R) | Rich (R) & Larson (R) – Sales Tax Administration: This bill aims to simplify the state sales tax system for those retailers without a physical Colorado presence by requiring that out-of-state retailers be responsible for paying only the state sales tax rate on products shipped into Colorado. It also requires the Department of Revenue to be responsible for all state and local sales tax administration and return processing, and to provide businesses with a database of local government taxing rates and local taxing jurisdiction boundaries.
The state collects taxes for 151 cities, and another 71 home-rule cities collect their own taxes. Retail businesses now have to deal with dozens of bureaucracies. If you work out all the possible combinations of overlapping tax regions, you get more than 700 possibilities.
We need to find a way to simplify the sales tax system for the retail business community and realizing the business community’s desire for a statewide database that includes reliable GIS information and a single point of remittance and licensure that eases some of the burden on business due to the extreme complexity of the sales tax system.
Both of these bills look unlikely to pass; we encourage businesses to reach out to elected officials to support SB006 and SB130.
Chris Romer is president and CEO of the Vail Valley Partnership, the regional chamber of commerce. Learn more at http://www.vailvalleypartnership.com.
