Does Nexus with Colorado State for Sales and Use Tax mean Nexus with all State-Collected Local Jurisdictions?
Until recently the answer was, “No“. The answer is now, “Yes“.
The Colorado Department of Revenue (“DOR”) recently adopted Emergency Rules regarding Wayfair and Economic Nexus. The Emergency Rules also changed Colorado’s Sourcing Rules. Additionally, the DOR withdrew Sales FYI 62 Guidelines for Determining When to Collect State-Collected Local Sales Tax from its website and listed it as “Under Review”.
South Carolina just clarified that Remote Sellers with Economic Nexus for sales and use tax in the South Carolina means Nexus in All SC local jurisdictions. All of this seemed to indicate Colorado was going to require collection of sales tax in all State-collected local jurisdictions as well.
There was discussion of Wayfair and hinting at state-wide Colorado local sales tax collection during the Colorado Legislative Sales and Use Tax Simplification Task Force meeting held at the Capitol on 9/27/2018. During the Task Force meeting, CO DOR’s representative Brendon Reese indicated the DOR would be making changes to their sales tax system to accommodate State-wide reporting capabilities.
The Colorado Municipal League Deputy Director and Task Force Representative, Kevin Bommer addressed Colorado Home-rule municipalities’ concerns. Self-collecting home-rule cities are not covered under the CO DOR’s sales tax administration and will need to address Economic Nexus independently of the State.
After the meeting Mr. Reese confirmed the State does consider Economic Nexus in Colorado State to mean a requirement to collect all State-collected local sales taxes.
The CO DOR’s webpage “Information for Out-of-State Retailers” addresses the question, “What local sales tax do I need to collect in addition to state sales tax?”
The answer is:
“Local and special district sales tax due is based on the rates that apply for destination address of the product purchased. The form Colorado Sales/Use Tax Rates (DR 1002) lists city, county and special district sales taxes that are collected by the state. Home Rule Cities for which the State does not collect local sales tax should be contacted directly. The form lists the home rule cities that are self collected and how to contact them.
There are certified address database providers that have taxing information by address. These provider services have been certified by the Department as accurate. Taxpayers who use these certified databases will not be liable for sales and use tax otherwise owed to the State of Colorado and state-collected municipalities, counties and special districts if the database incorrectly designates the location of a sale, storage, use or consumption of taxable tangible personal property or services. This is the “hold harmless” provision in Colorado statute.
The CO DOR did not receive supplemental funding requested for resources to accommodate the estimated 10,000 additional retailers expected to register according to Mr. Reese. Though the changes is anticipated to bring in ˜$44 Million in revenues between December 1st 2018 and the end of the Fiscal year June 30, 2019, the DOR will be short-handed in making the needed changes and processing applications, etc.
Our Recommendations? Apply early and utilize one of the State-certified address verification vendors or another reputable sales tax compliance software company to manage your Colorado State and state-collected local jurisdictions’ sales tax. Keep updated on Colorado home-rule cities’ developments regarding Economic Nexus as they seem sure to follow.
Notes:
- Not all providers that integrate with your shopping cart handle the needed address verification and varying taxability in Colorado.
- Fulfillment by Amazon (FBA) retailers likely have physical nexus in Colorado State and in the home-rule cities of Aurora and Thornton. Economic nexus thresholds do not apply.
- The CO DOR currently has a very complicated system of requiring Branch IDs (location specific extensions to account numbers), to assign sales to specific jurisdictions (State, County, Special Districts, and city whether home -rule or not). Each Branch Id means a separate return unless uploading an XML file or approved Excel spreadsheet.
More questions? We’re here to help…
Alan Smith
Sales Tax Colorado, LLC