Colorado further delays rollout of new sales tax rules
December 7, 2018
By Midori Feldman, Research Specialist
The Wayfair goal posts moved yet again in Colorado.
The Colorado Department of Revenue (DOR) has postponed the implementation of their rules, which require vendors shipping more than $100,000 or 200 separate annual sales transactions into Colorado until May 31, 2019 to obtain sales tax permits and pay sales tax to state and local jurisdictions. (The original implementation date was December 1, 2018. It was recently extended to March 31, 2019).
DOR updated their “grace period” web page yesterday to change the compliance date from March 31st to May 31st. An internal DOR email stated the reason for the extension of the grace period was due to the input received at the emergency rules hearing they held on November 30, 2018. Our own Jeff Carroll attended and spoke at that hearing, urging the Colorado Department of Revenue to postpone the implementation of the new rules due in part to the complexity of filing returns and complying with the local jurisdiction requirements in Colorado.
The rules as they are currently written require a vendor to register with and file a separate sales tax return for each state-collected jurisdiction to which they sell. There are over 600 local jurisdictions in Colorado. Worse, Colorado has over 70 non-state collected jurisdictions; jurisdictions that handle their own tax collection. They are referred to as “home rule” jurisdictions. Vendors are expected to contact each of those 70+ home rule jurisdictions, obtain their forms, stay current on their rates and rules, and file separate returns with those 70+ jurisdictions.
We confirmed with DOR that sellers (including wineries) that either have an existing Retailer’s Use Tax Permit or are over either of the thresholds can keep or obtain a Retailer’s Use Tax permit between now and the June 1st effective date. Beginning June 1st, any seller over the threshold will be required to obtain a Sales Tax permit and begin collecting and remitting local taxes on top of the state and special district taxes.
These new rules are being implemented as a result of the U.S. Supreme Court case, South Dakota v. Wayfair. That case paved the way for states to collect sales taxes from out of state sellers, once that seller ships a significant amount of sales into the state. The “Supremes” said that such a result does not violate the Commerce Clause, the clause in the U.S. Constitution that prohibits laws that impede commerce between the states. One of the significant persuading factors cited was the ease of filing taxes. We are not entirely confident the “Supremes” would have come to the same conclusion had they foreseen the CODOR’s proposed rules. However, we are hopeful that between now and June 1, that the CODOR will thoroughly examine their procedures to make them workable for all.