The Colorado Department of Revenue adopted temporary emergency regulations to require any retailer that is “doing business in Colorado” and has “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, apply prospectively and will take effect December 1, 2018.
Some Key Highlights:
REGULATION 39- 26-102.3 (Repealed) – “Doing Business in this state…”
Regulation 39-26-102(9). Retail Sales.
Basis and Purpose. The bases for this rule are §§ 29-2-105(1)(b), 39-21-112(1), 39-26-102(9), 39-26-102(10), 39-26-104, 39-26-107, 39-26-204(2), and 39-26-713, C.R.S. The purpose of this rule is to establish the location to which a retail sale is sourced within Colorado.
(3) “Retail sale” includes only those sales made within Colorado. For purposes of determining whether a sale of tangible personal property or services, other than leases or rentals controlled by subparagraphs (4), (5), or (6) below, and sales of mobile telecommunications services under §39-26-104(1)(c), C.R.S., is made within Colorado, the following rules apply:
(b) When tangible personal property or services are not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser (or the purchaser’s donee, designated as such by the purchaser) occurs, including the location indicated by instructions for delivery to the purchaser (or donee), if that location is known to the seller.
Note: Other subparagraphs detail requirements if the location address is not known.
Regulation 39-26-105. Remittance of Tax.
(4) Application.
(a) The liability and responsibility imposed by § 39-26-105, C.R.S. and this rule apply to any retailer that has substantial nexus with Colorado and is doing business in this state, as defined in § 39-26-102(3), C.R.S. Retailers are considered to have a substantial nexus with Colorado for sales tax purposes if they meet any of the following criteria:
(I) the retailer maintains a physical presence in Colorado pursuant to §§ 39-26-102(3)(a), (d), and (e), C.R.S.; or
(II) in the previous calendar year or the current calendar year:
(A) the retailer’s gross revenue from the sale of tangible personal property or services delivered into Colorado exceeds one hundred thousand dollars; or
(B) the retailer sold tangible personal property or services for delivery into Colorado in two hundred or more separate transactions.
(b) Paragraph (4)(a)(II) of this rule shall not apply in determining a retailer’s liability and responsibility for tax pursuant to § 39-26-105, C.R.S. and this rule for any sale made prior to December 1, 2018.
Implications?
Effective December 1, 2018 – Economic nexus if CO derived gross revenue is over $100,000 or if more than two hundred separate transactions.
It seems this indicates that Sales tax is due for all the State and all state-collected local jurisdictions on not just jurisdictions the seller and purchaser have in common as previously required.
That means multiple location branch ids and return filing unless a simplification of the return filing process occurs. This is a huge burden if you don’t have a sales tax compliance software provider to calculate sales tax and file your returns.
Need more information or help properly complying? We can help.
Resources:
Colorado Sales Tax Changes
Colorado Sales Tax Quick Answers
Colorado Sales Tax Basics