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 tas 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.

To be alerted by email when the GIS goes live sign up here.

 

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 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 are now 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. Businesses that exclusively use a marketplace facilitator* may not have an obligation to collect and remit sales tax if that responsibility falls to the marketplace facilitator.** 

 

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 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.

 

* The provision for marketplace facilitators does not go into effect until October 1, 2019.

** A business that conducts retail sales through a marketplace facilitator, but also conducts retail sales through other means such as their own retail store, may still be liable for collection and remittance of sales tax for sales not conducted through the marketplace.

 


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