Colorado Imposes New Requirements on Retailers Without Nexus?
Updated for Emergency Regulations as of March 3, 2010!
As stated yesterday and in earlier posts, Colorado has not only enacted a rebuttable nexus presumption on remote sellers that are part of a controlled group of corporations that contains a retailer with a physical presence in Colorado, but they have also imposed some burdensome notification and filing requirements on "retailers that do not collect Colorado sales tax."According to Emergency Regulations,
A retailer that does not collect Colorado sales tax is a retailer that sells taxable property or services to customers who are not exempt from sales tax but does not collect Colorado sales or use tax. Such retailers are also referred to in this regulation as “non-collecting retailers”.NOTICE REQUIRED ON EACH INVOICE!
A non-collecting retailer must give notice with respect to all Colorado destination sales that Colorado tax is due on all non-exempt purchases. This notice must appear on each invoice. See the Emergency Regulations for details on what the notice should include.
Non-Collecting Retailers with Less than $100,000 in Total Sales are Exempt From Requirement???? (Emergency Regulations vs. HB1193 statute)This is what the Emergency Regulations state.Any non-collecting retailer that made total gross sales in the prior year of less than $100,000 shall be exempt from the notice requirement in (3)(a).
(NOTE: Despite this exemption, are you going to know if you will be under this threshold for the year, at the time you are making sales into Colorado?)
The actual statute under HB 1193 states:
the Executive Director of the DOR may require any retailer that does not collect Colorado sales tax that makes total Colorado Sales of more than one hundred thousand dollars in a year to file the annual statement described in sub-subparagraph (A) of this subparagraph (II) by magnetic media or another machine-readable form for that year.
Therefore, under the statute, the $100,000 gross receipts threshold or exemption does not exist in regards to the "notice requirement."
Unfortunately, until Colorado clarifies, this remains unclear.Penalty for Non-Compliance ($5 for EACH INVOICE)
The non-collecting retailer shall pay a penalty of $5 for each invoice documenting a sale to a Colorado purchaser on which the required notice does not appear.
GRACE PERIOD (Waiver of Penalties March 1 - April 30)
Because of the brief time period between enactment of the governing statute and required implementation, if a non-collecting retailer begins to provide the required notices or begins to collect Colorado sales tax prior to May 1, 2010, any penalties that would otherwise be due for invoices issued between March 1, 2010 and April 30, 2010 shall be waived. However, no such waiver shall automatically apply if the non-collecting retailer does not begin to issue the required notices or begin to collect Colorado sales tax prior to May 1, 2010.
In addition to the above notification requirement per notice, there is the annual notices (one to the purchasers by 1/31; and one to Colorado DOR by 3/1). See yesterday's post.Current Confusion:
- Do these notice requirements only apply to remote retailers that do not collect sales tax, and are part of a controlled group of corporations that contains a retailer with a physical presence in Colorado?
- Or do the notice requirements apply to all retailers that sell into Colorado regardless of nexus, and regardless if the remote retailer has an affiliate with a physical presence in Colorado?
- Can the state impose information reporting requirements on remote retailers that lack nexus on their own just because an affiliate has nexus, if the affiliate does not act or represent the remote retailer in any way?
- Are remote retailers that sell less than $100,000 in total sales in a year exempt from the notification and filing requirements?
If these changes impact your company, please contact me at email@example.com for guidance. Also, stay tuned for additional updates or changes.
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 firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.