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Sales Tax Gets Complex in Colorado

Sales Tax DataLINK - Wednesday, October 17, 2018


Colorado will start requiring online sellers to collect sales tax as of November 1, 2018. They haven't yet announced all the details... and there might be a good reason for that.

According to the Tax Foundation, Colorado has 349 county, city, and district local sales tax jurisdictions. The Tax Foundation reckons that Colorado is not ready for online sales tax collection yet, because those 349 jurisdictions are autonomous. Each jurisdiction collects sales tax separately, with a different tax base.

The state is adjusting its tax code following the Supreme Court Wayfair decision, which allows states to insist that remote sellers collect and remit sales tax. Cities in Colorado will have to adjust their tax codes, too, if they want to benefit. 

College town Ft. Collins is one that does want to cash in. Ft. Collins has been collecting city sales tax from Amazon on a "voluntary" basis since 2016, and they plan to do the same for other retailers once the state sales tax law changes. The city is drawing up a list of retailers to focus on, in fact.

The Tax Foundation doesn't think it's going to work out. The state has announced that it will not collect retroactively, and that small sellers with less than $100,000 a year in sales in Colorado will be exempt. These factors were mentioned in the Wayfair decision. Since the state in the Wayfair case was careful not to create an undue burden for online sellers, the justices said, they were willing to allow it.

A seller who has transactions in hundreds of cities, counties, and districts might be able to show that meeting that many different filing requirements is in fact an undue burden.

Sellers with $100,000 in revenue or 200 transactions must register for a Colorado Sales Tax License by November 30, and they must begin collecting sales taxes on December 1st. As for the other jurisdictions, Colorado's information page has this to say: "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." The Home Rule group includes two counties and 72 cities.

In case you were wondering, "All self-collected jurisdictions are home rule jurisdictions, but not all home rule jurisdictions are self-collected jurisdictions."

Colorado may be especially complicated -- but many states are. Chances are good that there will be more court cases, more discussion on what constitutes an "undue burden," and lots more changes before it all shakes out. Give yourself a fighting chance with SalesTaxDataLINK. Try us for free.