Sales Tax Information for In-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. For a complete list of location/jurisdiction codes for sales tax filing, see form DR0800.

Temporary Exceptions for Small Businesses:

HB19-1240 provides a temporary exception to destination sourcing for small businesses physically located in the state of Colorado that have less than $100,000 in sales during the previous calendar year. Such sellers may source their sales to the business location of the seller and collect all applicable state-administered and special district taxes for their business's jurisdiction. This is called origin sourcing.

Should the small business exceed $100,000 in sales during a calendar year, the business must transition to using destination sourcing. Businesses will have until the first of the month, 90 days following the date they exceed the $100,000 threshold to begin using destination sourcing. 

The temporary small seller exception is effective until a new Global Information System (GIS) from the Department of Revenue is available online. After the launch of the GIS, all businesses will have 90 days to transition to destination sourcing.

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Global Information System (GIS):

 

The new law has also tasked the Colorado Department of Revenue with implementing an online Global Information System (GIS), which would allow businesses to look up the specific sales tax rate for an individual address. The GIS will not only show state sales tax information, but it will also include sales tax information for counties, municipalities, and special taxation districts. This system will allow businesses to accurately calculate and collect sales tax from their customers. 

 

Marketplace Sales Tax:

 

HB19-1240 has a second provision that will go into effect on October 1, 2019 that deals specifically with sales tax collection when selling through a marketplace facilitator. Information regarding these changes can be found in the Department of Revenue Marketplaces Guidance publication.

 

More Information:

 

For additional information on the new sales tax law and marketplaces, visit the sales tax page for out-of-state retailers. Information regarding sales and use tax in Colorado can be found in the Department of Revenue Sales Tax Guide. Visit Revenue Online 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


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