On September 11, 2018, the Colorado Department of Revenue Division of Taxation adopted temporary emergency regulations (eDocket)
requiring retailers that are “doing business in Colorado” and have “substantial nexus” with the state to collect Colorado sales or use tax, as applicable.
In addition, the Department adopted an emergency rule prescribing the sourcing of retail sales in Colorado to determine which jurisdictions may impose
tax on the sale. These regulations, which apply to both in-state and out-of-state retailers,will take effect December 1, 2018.
This temporary emergency regulation puts out-of-state sellers on notice that final regulations will require them to register for a Colorado sales tax license and start collecting sales tax on November 1, 2018, if they aren't already doing so. The department says the regulations will apply a $100,000 or 200-transaction limit we're seeing in other states and won't collect sales tax retroactively. The deadline to register for out-of-state retailers that don't meet the small-seller exception will be Nov. 30, 2018.
This could be a messy transition. According to Joseph Bishop-Henchman and John Buhl, writing for the Tax Foundation, Colorado isn’t ready.
"There’s a reason the state is colored bloodred on our map from our report showing which states were ready for the post-Wayfair leap into online sales tax collection. Colorado’s big problem is that it allows its 349 county, city, and district local sales tax jurisdictions autonomy in administering, collecting, and auditing. Filing is very cumbersome as a result, with the state and local tax base not necessarily adding up on a given transaction."
Bishop-Henchman and Buhl go on to explain that if online sellers in Colorado have to collect both state and local sales tax (as opposed to state tax alone), then the policy would go "beyond what Justice Anthony Kennedy wrote was permissible in the U.S. Supreme Court’s Wayfair decision." State-only tax level collection is more defensible.
Stay tuned...we'll be hearing more from the Colorado Department of Revenue as they rush to meet their own deadline.
The temporary emergency regulations can be found on the Secretary of State’s eDocket system. The regulations will be published in the October 25, 2018 Register. For additional information on these changes, visit the department's website at www.colorado.gov/tax/sales-tax-changes.
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Judy Vorndran can be reached at email@example.com or 720.227.0093. Follow Judy on LinkedIn.
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