We can add Colorado to the list of states who have formally announced they are addressing the issue of online sales and remote sellers. Governor Bill Ritter of Colorado has presented his Budget for fiscal year 2010-2011 to the Joint Budget committee. He has indicated that the plans are for the Department of Revenue to adopt new regulations that will require remote sellers to collect and remit the sales and use tax if they use affiliates to solicit within the state. As other states claimed, Colorado is stating that this is not a new tax but an enforcement of current legislation.
The estimates are that the new enforcement which they anticipate beginning July 1, 2010 will bring in $5 Million in much needed revenue.
From page 19 of the Budget Reduction Proposal dated November 6
Sales Taxes for Online Purchases (“New York Nexus Statute”): No specific statute – sales tax nexus requirement contained in 39-26-102(3), C.R.S. (2009) – definition of “Doing business in this state”
• The estimated annual impact from the current exemption is $5.0 million.
• The state of New York recently enacted a statute to specify that any vendor that is making sales into the state and is also utilizing affiliates in the state to advertise or otherwise solicit business for the vendor must collect the state’s sales tax.
• This approach to sales tax nexus could also be taken by Colorado. Although no specific provision allows or prohibits this approach, Colorado has not asserted affiliate nexus of this type in the past. The Department of Revenue will adopt a new regulation to implement this change which will become effective July 1, 2010.
• It is estimated that this change would raise approximately $5.0 million in new sales tax collections. Though this will equate to new revenue to the State, this is not a change in tax policy; but rather, is an enforcement of existing law. This amount is based on New York’s experience after reductions to account for population differences.
We are going to have to keep a close eye on Colorado to see if and how the new regulations will be implemented. We will do more research to see if they plan on enacting new legislation or if it is really only a matter of enforcing the current nexus definition.