Sales Tax Information for Out-of-State Retailers

Destination Sourcing:

 

As businesses have moved toward an online sales model, sales tax collection for the State of Colorado has changed with the passage of HB19-1240 to account for that shift. Beginning June 1, 2019, sales tax will be calculated based on the buyer’s address when the taxable product or service is delivered to the consumer. This is called destination sourcing


Destination sourcing is also used when a product or service has a lease/rental agreement with periodic recurring payments. Businesses will now be required to collect and remit sales tax for all retail sales to Colorado consumers, regardless of the physical location for the business. Exceptions to the new sales tax law may apply to small businesses and marketplace sellers. Information regarding exceptions to the new sales tax is below.

 

Small Business Exception:

 

If a business does not have more than $100,000 of taxable sales into the state of Colorado in the past calendar year they are exempt from collecting and remitting state sales tax. They must still notify customers of their obligation to remit use tax

 

Marketplace Sales Tax:

 

HB19-1240 established parameters for how sales tax will be collected and remitted in situations where sales between a buyer and seller are facilitated by a third party. The new sales tax law defined the terminology used in such scenarios: 

  • Marketplace:  a physical or electronic forum where tangible personal property, commodities, or services are offered for sale. A marketplace includes (but is not limited to) a store, booth, internet website, catalog, or sales software application.
  • Marketplace Facilitator:  a person, business or group of people who engages directly or indirectly to transmit/communicate an offer/acceptance between a purchaser and marketplace seller to buy a product or service and transmits payment for the purchase from the purchaser to the marketplace seller. Internet advertising services and classified advertising websites are not considered marketplace facilitators. 
  • Marketplace Seller:  a person or business that has an agreement with a marketplace facilitator to offer tangible personal property, commodities, or services for sale through a marketplace owned, operated or controlled by a marketplace facilitator.
  • Multichannel Seller: a person or business that sells tangible personal property, commodities, or services both through a marketplace and other means, such as their own business location or website.  

Marketplace facilitators, starting October 1, 2019, will be required to collect and remit sales tax for all sales to Colorado consumers which they facilitated on behalf of marketplace sellers. As a result, businesses and individuals that sell products through a marketplace facilitator may not have to collect and remit sales tax. If the marketplace seller provides incorrect information to the marketplace facilitator regarding the amount of tax that should be collected, then the marketplace seller can be liable for the amount of sales tax that the marketplace facilitator failed to collect, plus applicable penalties and interest. A multichannel seller will be responsible for sales tax collection and remittance for sales that are not facilitated through a marketplace facilitator.

 

More Information:

 

Information regarding sales and use tax in Colorado can be found in the Department of Revenue Sales Tax Guide. Visit RevenueOnline to find information about how to remit sales tax and to file a Colorado Sales Tax Return. To view a copy of HB19-1240, visit the Colorado General Assembly website

 


To sign up for email updates pertaining to Sales Tax Changes click here.


Get your sales tax questions answered with our Free Live Webinars

Can't Make the Webinars? We've got you covered with our previously recorded webinar.

Frequently Asked Questions