COLORADO’S RECOMMENDATIONS FOR A UNIFORM SALES AND USE TAX BASE THROUGHOUT THE STATE

Joint Efforts Made to Simplify Sales and Use Tax in Colorado

In HB13-1288 the Colorado Legislature directed the Department of Revenue(DOR) to reduce the complexity of the existing tax structure in Colorado. The DOR was directed to recommend ways to achieve a uniform sales and use tax base while maintaining revenue neutrality.

The DOR recently published its recommendations Uniform Sales and Use Tax Base Throughout the State. Some report excerpts are as follows: “Currently, Colorado has nearly 300 taxing authorities with differing sales and use tax bases, but when overlapping boundaries are taken into account, there are over 700 areas with different rates and bases (Appendix B: Taxing Jurisdictions in Colorado lists these entities.). This situation produces a heavy burden on businesses operating in our state.

To address the lack of uniformity among the sales and use tax bases throughout Colorado, while respecting the needs of local taxing jurisdictions, HB13-1288 was proposed by Representative Kathleen Conti, Representative Daniel Kagan, Senator Pat Steadman, and Senator Owen Hill. On May 28th, 2013, HB13-1288 was signed into law by Governor John Hickenlooper.

Complexity of Colorado’s Taxing Jurisdictions

There are 294 taxing jurisdictions in Colorado (according to Colorado Department of Revenue. Taxpayer Service Division. DR 1002 (12/31/12)):

• The State of Colorado
• The Regional Transportation District
• The Scientific and Cultural Facilities District
• 8 Local Improvement Districts
• 3 Mass Transit Districts
• 5 Rural Transportation Authorities
• The Multi-Jurisdictional Housing Authority
• The Public Safety Improvement District
• 2 Metropolitan Districts
• 152 statutory cities and towns
• 51 counties
• 69 home rule cities

Overlapping boundaries due to cities, counties, and special jurisdictions contribute a total of 756 areas with different rates and bases.

Because of their dependence on revenues generated through the sales and use taxes, many of the local jurisdictions have not adopted certain exemptions that are passed on a state level. As a result, the State’s sales and use tax base is much narrower than the average local base.

Home rule jurisdictions have exercised their right to establish their own sales and use tax base, including their own definitions. The resulting lack of uniformity among sales and use tax bases throughout the state can be especially cumbersome for businesses operating in multiple jurisdictions in Colorado.”

The issues highlighted are some of the key areas that make handling Colorado sales and use tax so difficult. Reaching agreement on uniformity while maintaining revenue neutrality will be difficult. The State’s exemption on food for personal home consumption is one especially difficult area since it is a significant source of revenue for some local jurisdictions. The State will face pressure to give up the exemption.

We commend the cooperative efforts of all involved in working to simplify the tax structure in Colorado. Problems still exist. Self-interests will still arise and hinder efforts. Solutions are still needed.

This is a very important area to us at Sales Tax Colorado, LLC! The difficulties of properly complying are tremendous. We work to educate taxpayers to help them avoid costly mistakes and audits. We also know the taxing jurisdictions don’t get needed tax revenues because of improper compliance and the heavy burden. Small to mid-sized businesses often just can’t afford to manage sales and use tax properly.

We recommend and urge you to become involved by finding out about your home-rule city’s position, contact legislators, work with the State Chamber of Commerce and Industry (CACI) tax council and put forth ideas for solutions.

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.