Colorado has had some challenges as the legislature tries to work out the details of sales tax for remote sellers. They actually had to back off and reschedule their changes. As of June 1, 2019, however, remote sellers with revenue from Colorado of $100,000 or more must collect and remit sales tax.
That’s $100,000 for the calendar year 2018, or for 2019. A business that hasn’t already sold $100,000 this year or last year will have to begin complying with sales tax rules as soon as they hit $100,000. So a company that sells $100,000 in Colorado on June 16th will have to begin collecting sales tax beginning on June 17th.
The exemption for small businesses is temporary. Colorado is working on a Geographic Information System (GIS) which will help sellers with Colorado’s complicated tax rate situation. Tax rates will be based on the destination — the address goods are shipped to — not on the origin of the goods. Since Colorado has more than 638 different tax jurisdictions, businesses could easily be overwhelmed by the effort of figuring out the tax rates for multiple customers in the state.
So the Colorado Revenue Office is creating a database that will allow sellers to input an address and see the tax rate, free of charge. This tool won’t automatically sync with a shopping cart, but it will allow sellers to look up tax rates with confidence. Once the GIS is ready, small sellers will have 90 days to start collecting sales tax.
Marketplace facilitators (think Amazon or Etsy) will have till October to work things out. The merchants under these umbrellas will not have to collect taxes. However, if their marketplace facilitator doesn’t take care of it, the merchants will be responsible for any back taxes owed.
Colorado is removing all references to “remote sellers” and trying to keep things simple. All sales tax responsibilities are connected with the location where the goods are provided to the buyer. That means that a physical store in Denver where a customer buys an item and carries it out in a sack is in the same position as an e-commerce merchant who sells online and ships the item to Denver.
Small remote sellers
A business with less than $100,000 in sales will not have to charge sales tax immediately. However, they will be responsible for reminding customers that they still owe Colorado use tax.
If you have sales in Colorado, it makes sense for you to go ahead and get a license if you have any reason to expect to hit $100,000 this year. The $16.00 fee covers you for two years, and you won’t have to worry about the process during the time that you are required to collect sales tax.
You should also be thinking about choosing the right software to make sales tax compliance as simple and accurate as possible. We believe that SalesTaxDataLINK is the right software. Call 479-715-4275 to find out how SalesTaxDataLINK can make a difference for you.