Sales Tax Administration

The United States Supreme Court, on June 21, 2018, decided South Dakota v. Wayfair, Inc., et al. , overruling 2 previous United States Supreme Court cases that stood for the rule that a state could not require an out-of-state retailer to collect sales tax if the retailer lacked physical presence in the state. Because of the Wayfair decision, states can require retailers without physical presence in the state to collect sales tax on purchases made by in-state customers so long as the sales tax system in the state is not too burdensome for the out-of-state retailer. The bill simplifies the state sales tax system for retailers without physical presence by:

• Not requiring retailers without physical presence that only transact limited business in Colorado to collect sales tax;
• Specifying that only the state's sales tax base, not a local sales tax base, will apply to all sales made by retailers without physical presence;
• Requiring that the department of revenue (department) be responsible for all state and local sales tax administration and return processing, including the establishment of a single form for returns;
• Specifying that a central audit bureau is the sole entity within the state that is responsible for auditing retailers without physical presence and specifying that the central audit bureau be developed by the department in coordination with local taxing jurisdictions;
• Establishing that sales are taxed based on where the goods are delivered (destination sourcing) for all sales made by retailers without physical presence in the state, including local taxing jurisdictions, but specifying that destination sourcing is not required for sales made by Colorado retailers;
• Requiring the department to provide information to retailers without physical presence that indicates the taxability of products and services along with any product and service exemptions from sales tax in the state;
• Requiring the department to provide retailers without physical presence a sales tax rate database and a database of local taxing jurisdiction boundaries;
• Requiring the department to make available free-of-charge software that calculates sales taxes due on each transaction at the time the transaction is completed, files sales tax returns, and updates to reflect any tax rate changes for the state or any local taxing jurisdiction;
• Allowing the department to contract with one or more certified software providers without regard to the procurement code to provide the software or provide access to the software;
• Allowing a retailer to elect to collect and remit sales tax on its own, without using the services of a certified software provider, or allowing a retailer to elect to use the services of a certified software provider;
• Specifying that, in providing the software free of charge, the contracts negotiated between the department and the certified software providers must provide that all or a portion of the vendor fee may not be retained by the retailer electing to utilize the services of a certified software provider but will instead be retained by the certified software provider as payment for its services;
• Requiring the department to establish certification procedures for persons to be approved as certified software providers; and
• Providing the required relief of liability for errors to retailers without physical presence and other retailers utilizing the software.

The bill allows local taxing jurisdictions governed by a home rule charter to opt in by passing an ordinance, resolution, or accepting the state's administration and distribution of its local sales tax on sales made by retailers without physical presence that is collected and remitted by such sellers in accordance with the bill.

(Note: This summary applies to this bill as introduced.)