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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.
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.
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.
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 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.**
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.
DO NOT WAIT UNTIL THE LAST MINUTE TO ADD NON-PHYSICAL LOCATIONS
Processing of new sites may take longer than usual to process during peak hours.
To Create a Revenue Online Account
To create a Revenue Online logon:
1. Go to Colorado.gov/RevenueOnline.
2. Under “Sign Up,” click on “Create a Login ID.”
3. Follow the steps to create a Revenue Online Login. Use the letter ID on this letter at Step 3.
4. Once you have submitted your request, you will receive a confirmation email.
To add a non-physical location for the state-collected jurisdictions in Colorado you ship to:
1. Identify the jurisdictions you need to add. Refer to DR 0800.
2. Log into your Revenue Online Sales Tax account. Under “I Want To,” click on “Add Non-Physical Locations.”
3. Follow the steps to add non-physical locations to your sales tax account. (Need help? Watch this video walkthrough.)
4. Once you have completed your request, you will receive an email confirmation.
Filing by Paper
If you cannot file through Revenue Online or another electronic method, please download the Retail Sales Tax Return Form DR 0100. Do not use old versions of the form. We cannot process old or photocopied forms.
Payment is due by the 20th day of the month following the reporting period.
Electronic Funds Transfer
Businesses that pay more than $75,000 per year in state sales tax must pay by Electronic Funds Transfer (EFT). Any business can pay by EFT. You can set up EFT ACH debit or ACH credit through your account in Revenue Online. The EFT payment must be submitted by 4 p.m. Mountain Time on the due date.
Online Payment in Revenue Online
If you are using Revenue Online to file your return, you may choose to pay by credit card or e-Check.
Check or Money Order
To ensure your payment is posted to your tax account, you must include the eight-digit Colorado Account Number (CAN) assigned to your account by the Department on the check or money order sent with the tax return. Omitting the CAN on your payment could result in your payment not posting properly and you receiving a Balance Due letter (Notice of Deficiency) from the Department. Note: The Federal Employer Identification Number (FEIN) is not the same as the CAN and will not post the payment to your account.
If you owe money and filed online, or with a tax software and want to pay by check or money order:
These provider services have been certified by the Department as accurate. Taxpayers who use these certified databases will not be liable for sales and use tax otherwise owed to the State of Colorado and state-collected municipalities, counties and special districts if the database incorrectly designates the jurisdictions to which tax is owed on the sale, storage, use or consumption of taxable tangible personal property or services. This is the “hold harmless” provision in Colorado statute.
In order to be state-collected the jurisdiction must conform to a prescribed list of exemption elections and conform to the State's tax base. There may be local ordinance changes required or other conforming actions necessary before the self-collected jurisdiction can qualify for the Colorado Department of Revenue to administer, collect and audit as a state-collected jurisdiction.