Colorado: Further Guidance on Requirements on Out-of-State Retailers

In previous posts, I raised areas of confusion regarding Colorado's new sales tax nexus and notification requirements enacted by the signing of HB 1193. See earlier posts. With that said, I thought I would provide some additional clarifications:

  1. The first section of the legislation (HB 1193) dealing with presumption nexus for remote retailers with component members of a controlled group is in a different statute separate from the second part of the legislation. Therefore, the second part of the legislation dealing with "non-collecting retailers" appears to apply to all "non-collecting retailers" as defined in the emergency regulations. In other words, the notice requirements appear to apply to all retailers that sell into Colorado and do not collect sales tax, regardless of nexus, and regardless if the remote retailer has an affiliate with a physical presence in Colorado.
  2. In regards to the $100,000 threshold, if you read the legislation closely, you will see it simply says any retailer with "total Colorado sales of more than 100,000 in year" is required to file the annual statement by "magnetic media." It doesn't say that those retailers with less than $100,000 in Colorado sales are not required to file an annual statement at all. The emergency regulations say that each non-collecting retailer with less than $100,000 "total gross sales" is exempt. Therefore, this exemption is based on "total gross sales" of the entity and not "total Colorado sales." Again, the statute does not provide the exemption, the regulations do. Who will trump?

CAVEAT: Those are my interpretations at the moment. We will have to wait and see if Colorado issues any more guidance or changes.

ADDITIONAL ITEMS TO NOTE

I have become aware that the Multistate Tax Commission (MTC) is currently in the process of creating 2 model statutes regarding sales tax:

  1. The Affiliate Nexus standard - similar to New York's
  2. The Notification standards - similar to Colorado's

MEANING: We could see other states adopt statutes similar to New York's and Colorado's.

CONSTITUTIONAL BURDEN?

It is believed that someone may file a lawsuit against Colorado's notification requirements prior to May 1st (when the grace period is over). The issue is that the requirements being imposed on out-of-state retailers without nexus is unconstitutional. The defense may be that the requirements being imposed are not a tax, but simply informational.

Please contact me at brian.strahle@bakertilly.com to discuss the impact on your company's situation.

For all blog posts related to this issue (past and future), go to COLORADO.

This blog

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States.  He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect."  For more info, visit his website: www.leveragestateandlocaltax.com

You can reach Brian at strahle@leveragesalt.com.

Connect with Brian on LinkedIn. Follow Brian on Twitter. Join the Leverage | SALT LinkedIn Group, connect and contribute with your colleagues!  

Because state and local taxes are deceptively simple and endlessly complicated.

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