By Judy Vorndran
A new Colorado sales tax collection law, HB19-1240, clarifies and codifies several
changes to the way sales tax is collected in the state. The new law establishes
economic nexus for retailers without physical presence in the state, codifies the
destination sourcing rule and implements a temporary small business exception,
sets marketplace facilitator rules, and repeals obsolete statutory references
to remote sellers.
Beginning June 1,
2019, retailers with economic nexus are required to collect and remit sales tax
on purchases made in the state of Colorado. The new sales tax obligations do
not apply for sales made prior to June 2, 2019. Economic nexus is defined as a
seller without physical presence in the state of Colorado selling tangible
personal property, commodities, or services exceeding $100,000 in a calendar
law codifies the use of destination sourcing for state sales tax collection. Tax is to be collected on the goods and services
sold based on a buyer’s address rather than the physical location of the
For small businesses overwhelmed by the
destination-sourcing rule, the law offers temporary relief until an electronic
system is in place. For small retailers physically located in Colorado, defined
as those with less than $100,000 of taxable sales and services, the law specifies that a small retailer may
source its sales to the business’ location regardless of where the purchaser
receives the tangible personal property or service until a geographic
information system provided by the state is available for the retailer to
determine the taxing jurisdiction in which an address resides.
Should a small business exceed $100,000 in sales within
Colorado during a calendar year, the business must transition to using
destination sourcing rules.
HB19-1240 provides that businesses selling through a
marketplace facilitator such as Amazon or other online entities are exempt from
collecting and remitting sales tax. The obligation falls to the marketplace
entity that facilitates the sale on behalf of the remote seller beginning
October 1, 2019.
Marketplace facilitators like Amazon and
Etsy must determine taxes owed by companies that sell through them and then to
collect and remit them to various districts, and it codifies a current Colorado
Department of Revenue rule that out-of-state retailers must collect and remit
sales taxes it they make $100,000 of sales into Colorado in a given year.
effective, marketplace facilitators will be required to collect and remit sales
tax on behalf of contracted marketplace sellers for the sale of the marketplace
seller’s tangible personal property, commodities, or services through the
marketplace facilitator’s marketplace. Marketplace facilitators can collect a
vendor fee on sales through its marketplace. Marketplace facilitators that can
demonstrate “reasonable effort” to obtain accurate tax collection information
from the marketplace seller will benefit from audit relief.
using a marketplace facilitator do not have the liabilities, obligations, and
rights of a retailer if the marketplace facilitator is required to collect and
remit sales tax on its behalf, including licensing, collection, and remittance
Simplify advocacy efforts continue
temporary small business sourcing exception is predicated on the development
and implementation of an electronic system to make it easy for business owners
to determine the taxing districts of each customer. This technology solution should enable taxpayers to collect and remit
sales and use tax to one location and provide a single location for licensing
and registering a business.
founding board member of the coalition to Simplify
Colorado Sales Tax Board that has formed around this issue,
HB19-1240 and the creation of a centralized
and online sales tax reporting system represent steady movement forward in
reforming Colorado’s excessively complex sales and use tax system. The
mission of the coalition is to reform Colorado’s complex SALT system and
replace it with one that is fair, simple and predictable for businesses.
Be part of real change that relieves businesses, consumers and tax authorities of administrative burden and cost, and potentially increases sales tax compliance across the state. Join me in the Coalition to Simplify Colorado Sales Tax today. Learn more.