Not Collecting Sales Tax in Colorado? January 31 Deadline Fast Approaching!

The January 31, 2011 notification to purchasers requirement is fast approaching.All retailers that meet the following requirements are required to notify purchasers by January 31, 2011 that they are required to self-assess use tax and pay it to Colorado:

  • Do not have nexus in Colorado
  • Do not collect sales tax on sales to Colorado purchasers
  • Have $100,000 or more in Colorado sales

The notification is required to ONLY be sent to customers with more than $500 in annual purchases from the non-collecting retailer.Background

Out-of-state retailers that are not required to collect Colorado sales or use tax and choose not to collect Colorado sales or use tax and have total annual gross sales in Colorado of $100,000 for customers that have more than $500 in annual purchases must:

Provide notice with each purchase

The notice must:

  • State that the retailer does not collect Colorado sales or use tax.
  • State that the purchase is not exempt from Colorado sales or use tax merely because it is made over the Internet or by other remote means.
  • State that State of Colorado requires Colorado purchasers to file a sales or use tax return at the end of the year for all taxable Colorado purchases that were not taxed, and pay tax on those purchases
  • The notice must be easily seen and located near the total price.

The notice may also state that the retailer will provide an end-of-year summary of Colorado purchases to the customer, and that the retailer is required by law to provide the Colorado Department of Revenue with an annual report of the total dollar amount of the customers Colorado purchases at the end of the year. (Details of how and when to file may be found at the Colorado Department of Revenue's Web site at http://www.taxcolorado.com/)

The notice will be sufficient if it appears on each invoice, or if no invoice is provided, if it is given as part of the sale, either immediately before, as part of, or immediately after the sale.

In addition, the retailer cannot display or imply that no tax is due. For example, a summary of the transaction including a line designated for “Sales Tax” cannot show the sales tax as “zero” or “0.00” because it would imply that no sales tax is due.

Provide an annual invoice to Colorado customers

The annual invoice must:

  • Be sent by first class mail to the last known address by January 31 of the following year in an envelope prominently marked with the words “Important Tax Document Enclosed.”
  • Summarize the date(s) of purchase(s), a description of the item(s) and the dollar amount(s) of the purchase(s).
  • State that the State of Colorado requires that the consumer file a sales or use tax return at the end of every year and pay the tax on Colorado purchases that did not include tax. Details of how to file this return may be found on the Web site http://www.taxcolorado.com/
  • Indicate that the retailer is required by law to provide the Colorado Department of Revenue the total dollar amount for of purchases made by Colorado consumers.

Out-of-state retailers that are not collecting the tax and have annual gross sales in Colorado of more than $100,000 must provide the information listed above electronically.

Colorado has created a webpage on their website for “Internet Sales / Non-Collecting Retailers.”The site includes submission guidelines, templates for transactional notice, and sample annual customer notice.

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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