Many of Colorado’s 70 self-collecting Home-rule cities in Colorado have adopted the CML’s Model Ordinance regarding Economic Nexus that is applicable to out-of-state Sellers.  Colorado Springs, Denver, Fort Collins, Golden, Northglenn, and Pueblo are a few examples.  This blog is about home-rule jurisdictions. The Colorado Department of Revenue already required state-wide collection and remittance of all state-collected special district and other local jurisdiction’s sales tax as of June 1st, 2019. (See the Small Seller Exception noted at the end of this blog)

What about “in-state” businesses with no physical presence in these home-rule jurisdictions?  Do they have to register with the home-rule jurisdictions and collect their sales tax?

The answer can be, “Yes” depending upon the particular municipal code of the home-rule city (city/ town, combined city & county).

Language like the City of Golden’s under the “Engaged in Business” subparagraph (5) indicates businesses in Colorado can have what I’d deem as “in-state” Economic Nexus since “delivered by any means” doesn’t require a physical presence in Golden.  Golden’s Finance Director, Jeff Hansen confirmed my interpretation and understanding of the the code listed below:

(5)        Any retailer who does have a physical presence in the State of Colorado, without having a physical presence within the city, that in the preceding calendar year or the current calendar year makes more than one retail sale of tangible personal property, products, or services, where the location at which property or a product is delivered by any means, including common carrier within the city, or the service rendered occurs within the city;

What does this mean for businesses located in Colorado? 

Generally if they make more than one sale with delivery, by any means, to a customer in a home-rule city with code like Golden’s they will have to register and collect and remit the City’s sales tax to the city. Golden’s time frame for more than one sale is within the prior or current calendar year.

What about home-rule cities that didn’t adopt code as broad as Golden’s?

Physical presence nexus is called or defined by the Cities as “Doing Business” or “Engaged in Business”. The general rule of thumb for deliveries triggering physical presence nexus was more than one delivery into the city made by company personnel (or company representatives, in a company vehicle, etc.) within a 12 month period.  I believe that standard still applies absent specific language indicating the method of delivery doesn’t matter.  (Use of a 3rd party carrier such as UPS, FedEx, Post Office, etc. vs. company personnel). there are other triggering activities of Engaged in Business, but I’ve focused the delivery method.  Prior to the change, sales with 3rd party deliveries alone didn’t trigger an obligation to register, collect and remit .

For those unfamiliar with the complexity of Colorado’s sales tax situation, there are state-collected local jurisdictions and self-collecting home-rule jurisdictions.  The 70 self-collecting home-rule jurisdictions function independently of each other and from Colorado State. They have their own sales and use tax municipal codes, licensing requirements, rules, regulations, definitions, informal guidance, court cases regarding taxability. They also have their own or hired 3rd party auditors, etc.  They are essentially a state unto themselves when it comes to administering sales tax.

Properly complying with Colorado State, state-collected local jurisdictions’ and home-rule jurisdictions can be very difficult.  Failure to collect and remit sales tax properly can lead to costly errors resulting in liabilities for the tax, interest and penalties.  If a sales tax return was never filed, the statute of limitations remains open.  Home-rule jurisdictions can, and some do, audit back to day one of business in their city.

Contact Us for further help properly handling sales and use tax compliance in Colorado or to resolve prior liabilities.

NOTE:

Small Business Destination Sourcing Exception Extended!

• The recent passage of HB 22-1027 (Sales Tax Destination Sourcing Rules Exception) has extended the small business exception to destination sourcing requirements through September 2022. The small business exception only applies to businesses with less than $100,000 in retail sales.
• What does this mean? Barring any further legislative changes, sales tax for all retailers, regardless of their amount of annual sales, will be calculated and sourced at the point of delivery in accordance with Destination Sourcing requirements by October 1, 2022.