|Colorado to Enforce Sales or Use Tax Reporting|
Colorado recently passed legislation that seeks to enforce sales or use tax reporting by out-of-state retailers and their Colorado customers. Additional reporting requirements for retailers who do not collect Colorado sales tax
Out-of-state retailers who do not have a physical presence in Colorado are not required to collect and remit Colorado sales tax. When the seller does not collect Colorado sales tax on goods shipped to Colorado customers, the seller is now required to include a notice on the Colorado customer's invoice indicating that the recipient is required to pay use tax on all non-exempt purchases. For full notice requirements please see Colorado Emergency Regulation 39-21-112.3.5
. Failure to provide this information will result in a $5 per invoice penalty on the seller.
Such penalties will apply starting May 1, 2010. Retailers with total annual gross sales less than $100,000 are exempt from this requirement.
Additionally, the retailer must provide a year end summary of all sales to Colorado customers detailing the amount of sales on which use tax may be due. The retailer must also provide this information to the Colorado Department of Revenue. Failure to provide this information will result in additional penalties on the seller.
There is debate on whether these new requirements are constitutional and a legal challenge is anticipated. Until there is resolution we recommend including language similar to the paragraph below on your invoices to Colorado recipients. You might accomplish this by placing a sticker with the language on the Colorado invoices. Be sure to make a copy for your own records, as well.
Important Sales Tax Information for Colorado Purchasers
We are not required to collect Colorado sales tax on your purchase. However, unless this sale is exempt from Colorado sales tax, you are required to pay the tax by filing a sales/use tax form with Colorado at the end of year for all non-taxed remote purchases, including Internet purchases. We will provide you with a year-end summary of all your purchases from us. We are required by Colorado law to report the total purchase amount of your total non-taxed sales to the Colorado Department of Revenue. For more information go to www.taxcolorado.com.
More out-of-state companies presumed to be taxable in Colorado
Out-of-state retailers that are part of a controlled group of corporations in which one member has a physical presence in Colorado are presumed to be doing business in Colorado. All retailers in the controlled group are required to collect and report sales tax on Colorado sales, unless it can be proven that the retailer with the physical presence in Colorado did not solicit sales on the group members' behalf (Reg. 39-26-102.3).
For questions on the new Colorado requirements, please contact Darcy Kooiker, CPA, Director of State and Local Tax Services at firstname.lastname@example.org or Rachel Roberson, Staff Analyst at email@example.com or at (425) 454-7990.