In the midst of the holiday shopping season, Colorado will begin enforcing bold new sales tax collection requirements on remote sellers. Could other states follow in Colorado’s footsteps?
Colorado’s New Sales Tax Law takes Effect December 1, 2018.
Economic nexus requirements are enforced: Remote sellers with annual sales into the state reaching $100,000 or totaling 200 transactions will have economic nexus and must remit sales tax.
Why is this important? Many remote sellers who previously avoided sales tax collection in the state because they did not have physical presence will now need to register, collect, and remit sales tax. The deadline to register was November 30, 2018 but Colorado has extended a grace period to May 31, 2019.
Keep in mind, Colorado is home to two Amazon warehouses (Aurora, CO and Thornton, CO), so many Amazon sellers already have physical presence in the state.
If you already have a Retailer’s Use Tax permit, depending on your situation, you may need to apply for a Sales Tax permit and cancel your Retailer’s Use Tax permit.
More changes could follow:
Most states require remote sellers with any form of nexus to only register, collect and remit sales tax to the state. The state then disburses the sales tax to local jurisdictions. Currently the new law appears to only have an immediate impact at the state level, but the Colorado Department of Revenue does not administer sales tax for 73 cities, known as Home Rule cities, that administer their own sales tax. In the future, remote sellers may be required to file and collect sales tax in some if not all of these cities, depending on where the merchandise is being shipped.
Next Steps
Remote sellers need to develop a plan of action for registration in Colorado’s Home Rule cities. Many factors should be considered before determining the next steps. Cherry Bekaert is closely monitoring the ever-changing sales tax environment in Colorado and will continue to keep our eCommerce community informed. Contact us if you have questions or need guidance.
The Cherry Bekaert team has worked with hundreds of FBA and eCommerce sellers over the last several years. We understand the uniqueness of the industry, the pain points, and the best solutions to help companies get in compliance. And we do this while keeping quality high and costs low. We have become the go-to resource for the leading sales tax software companies and have established ourselves as thought leaders for this industry.
We’ve assembled our team of sales tax experts, income tax experts, and international tax advisors to take the headache out of taxes and let you focus on growing your business.
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