When Do I Have to Collect Local Taxes? What about Home-Rule Cities?
How Do I Report State-Collected Local Taxes for Multiple Locations?
Retailers are to collect all applicable taxes within the boundaries of their taxing jurisdictions. These can include sales tax for Colorado State, most counties, state-collected (“Statutory”) cities, and any applicable special districts such as the RTA, RTD and Scientific/ Cultural District and others.
If you do business including performing services, soliciting sales, delivering or installing goods, renting or leasing, etc. in other cities, counties or special districts the situation gets far more complicated! See our Medical and Dental Providers tax tip or our Case Studies for service provider examples.
The Colorado Department of Revenue handles collection and administration of local sales taxes for all statutory cities, counties and special districts that impose a sales tax. For State-collected jurisdictions, a business would generally collect for jurisdictions they have in common with their customer’s point of delivery or service.
However, there are many home-rule cities that collect, administer and audit their own sales and use taxes. Cities such as Denver, Aurora, Fort Collins, Lakewood, Thornton, Arvada, Westminster, Pueblo, Centennial, Boulder and many more are home-rule jurisdictions. Each can have separate and differing laws and licensing requirements.
This is one of the key areas that makes handling Colorado sales and use tax so difficult.
When do you have to collect state-collected local taxes?
Colorado State is more lenient than many home-rule jurisdictions on deliveries made in company vehicles. Delivery alone without other business presence is generally not enough to trigger a requirement to collect for jurisdictions outside of where they have a physical location. Home-rule cities do commonly consider deliveries in a company vehicle as a sufficient business activity to create a presence or “nexus” in their city.
If you perform some types of services or even just one installation in state-collected jurisdictions, you may have to collect sales tax or retailer’s use tax on items sold. Mobile vendors, lessors and some out-of-state retailers can have an obligation to collect local taxes.
What should you do?
See Colorado FYI Sales 62“ Guidelines for Determining When to Collect State-Collected Local Sales Tax” for more detail. Use the Colorado State-certified address database and home-rule city databases to determine what taxing jurisdictions are involved and the correct rates to charge. Mailing addresses and zip codes are often insufficient! Far more is involved on this topic. Check into it further to help ensure you properly understand your situation and the compliance requirements.
What if you have to collect, report and remit for multiple locations?
For state-collected jurisdictions, you’ll need to establish branch ids for each physical and nonphysical location for which you are required to collect taxes. Nonphysical locations include locations where you are performing installations or other services with associated taxable sales. You can then file returns one branch ID at a time or use a state-approved template or other submission method for multiple branch ids. See Colorado FYI Sales 58 “Requirements for Sales Tax Remittance for Multiple Location Filers” for more details. For home-rule jurisdictions, a separate business license will typically be required for each city. They may also require other specific licenses such as sales, use, and occupation privilege tax licenses.
The information in this tax tip addresses issues in general and is limited in scope. Any potential results discussed may vary and circumstances may warrant more or less favorable outcomes.
It’s best to be proactive and to identify and resolve issues before an auditor contacts you. Voluntary Disclosure Agreements are no longer available once you’ve been contacted.
The good news is that remedies are often available when you’ve discovered obligations before auditors contact you. Anonymous Voluntary Disclosure is one option. Even if you are already under audit, we can often help. See our Audit Case Studies.
To learn more about how we can help with these or the following issues, please Contact us today:
- Assistance with proactive minimization of prior period sales/use tax liabilities
- Help with nexus questions and issues
- Other sales and use tax related questions
What are your priority issues and when do you want them resolved?
Please click here for more Sales Tax Tips. For additional insight on common sales tax concerns, please see the Did You Know? section of our website.
* This tip is intended to provide general information only and is not to be considered as a substitute for professional advice.