Location: RM 271
Overview from the Business Community
SALES AND USE TAX SIMPLIFICATION TASK FORCE
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02:47 PM -- Overview from the Business Community
Tony Gagliardi, National Federation of Independent Business and representing the Coalition to Simplify Colorado Sales Tax, discussed the effort to simplify Colorado's sales tax system and the difficulties of sales tax reporting and compliance for businesses. Mr. Gagliardi provided a handout to the task force (Attachment F).
Mr. Gagliardi spoke about the goals of the coalition being fairness, simplicity, and predictability, including in the continuation of stable revenue for local governments. Mr. Gagliardi credited the passage of Senate Bill 16-036, which amended surety bond requirements for businesses involved in sales tax disputes, as a major step forward in building trust between the state government, local governments, and businesses.
Loren Furman, Colorado Association of Commerce and Industry, continued the discussion. Ms. Furman spoke about the difficulty for businesses in complying with Colorado’s complex sales tax system. She also spoke about the cost for business in terms of penalties for noncompliance. Ms. Furman spoke about the work of the Colorado Association of Commerce and Industry Tax Council on tax legislation in the past and about the participation with the Colorado Municipal League in the standardized definitions project that was discussed previously.
Ms. Furman discussed the finding during the Colorado Blueprint process of the desire for a uniform tax and fee process and the resulting working group within the Colorado Department of Revenue. The working group identified several recommendations, including:
- the standardized definitions project;
- a state-run database where taxpayers could submit their tax returns and pay their payments in one location;
- having standardized tax returns by all cities; and
- having access to the state’s address location database.
Ms. Furman continued to speak about the work of the standardized definitions project. Ms. Furman responded to questions from the task force related to the state’s adoption of the same standardized definitions. Task force members also asked the department for an update on the state’s location database.
Lee Nelson, Assistant Controller for American Furniture Warehouse, discussed his role. Currently, American Furniture Warehouse files 88 returns each month in Colorado, 12 of which are filed electronically through individual websites and the rest are filed by mail. Mr. Nelson discussed the desire to simplify, including being able to file all returns to one place, get all licenses at one place, and receive information concerning tax rate increases from one place instead of having to work through each local taxing jurisdiction individually. Mr. Nelson spoke about American Furniture Warehouse’s use of a computer system developed by CCH Group, which determines the tax rate to charge a customer based on their address. This system cost $75,000 to integrate the two computer systems and they pay an additional $20,000 a year to keep up it updated.
Mr. Nelson and task force members discussed the cost of compliance for American Furniture Warehouse in terms of the computer systems and man hours. According to Mr. Nelson, the costs are approximately $50,000 per year, which includes 3.5 days to file the returns.
Bruce Nelson, EKS&H, discussed the potential for simplification to bring in additional revenue for cities and other taxing jurisdictions across the state. Mr. Nelson explained how, under the current system, some of his clients elect not to file returns in some places where they should be because of the effort involved. Mr. Nelson spoke about the history of the collection of sales taxes by businesses beginning in the 1930s and how the complexity of the current system prevents small businesses from complying fully.
Mr. Nelson responded to questions from the task force concerning the potential revenue increase for local taxing jurisdictions from simplification.
Neil Pomerantz, Silverstein & Pomerantz LLP, spoke about the audit process and the role of tax attorneys during tax disputes between businesses and local taxing jurisdictions. Mr. Pomerantz discussed several issues on the audit and assessment side that arise from the decentralized sales tax system of many local taxing jurisdictions that perform their own audits, issue their own assessments, and handle their own hearing process. These challenges include:
- the different tax bases among the home rule cities that creates confusion about what is taxable;
- the different interpretations by different jurisdictions of identical or nearly-identical language in their tax codes; and
- inconsistent interpretations within a single jurisdiction from one audit period to the next.
Task force discussion ensued concerning potential solutions that have been discussed. These have included:
- the adoption of the standardized definitions by the remaining home rule municipalities;
- a single database;
- standardized returns; and
- the adoption of the standardized definitions by the state.