Over the past couple of weeks I have received several emails asking for clarification on the Colorado Internet sales tax (HB1193). Since I am not a lawyer, I have urged every merchant to contact a sales and use tax attorney or accountant for guidance. The law that was passed in Colorado was the harshest we’ve seen since it can affect many merchants. While the “affiliate” aspect was removed, the law was broadened to encompass more merchants, even those who do not advertise online. Of course, it may be that only large merchants are affected (sales of over $100,000 in a year to Colorado residents) but I have been told that there is confusion there may be no exemption. (Please see first comment below). This confusion only emphasizes the need for merchants to seek qualified counsel.
In addition, this bill sets a precedent for other states that has many merchants concerned.
If you recall, affected merchants doing business with Colorado residents will need to either collect the sales tax or send a yearly notification to both the consumer and the Colorado Revenue department that sales and use tax is due. Notice must be included on every invoice and in January the merchant must send a statement to the Colorado resident that summarizes the taxable amount.
As I was catching up on my reading this morning and I came across some helpful information for merchants. Rather than doing a mass email I am providing the information here. First head on over and read Colorado Imposes New Requirements on Retailers Without Nexus it is a must read article. This article is a great overview of the new law and includes some very helpful information including a link to the Colorado Emergency Regulation that addresses the confusion over the new requirement.
As I read through the article I learned that Colorado has implemented a grace period in regards to the fine that is due for failure to provide the required information on the invoice. Merchants have until May 1 to either start collecting or start the required notification process.
I urge every merchant and affiliate to visit the two links provided. The new regulation in Colorado should concern everyone. If additional states follow through it will indeed be more of a challenge for our industry. It also may just be the push that many of our larger merchants need to get involved to resolve this issue on a Federal level.
My other concern with the new law in Colorado is that it still does not really clarify what constitutes a nexus or physical presence. We still have -
1. “Doing business in this state” under C.R.S. 39-26-102(3)(a) requires that the person both (1) sell, lease, or deliver tangible personal property in this state, and (2) maintain, directly or indirectly, an office, salesroom, warehouse, or similar place of business within the state. A person meeting these requirements must obtain a Colorado Sales Tax License. “Doing business in this state” under C.R.S. 39-26-102(3)(b) requires that the person both (1) sell, lease, or deliver tangible personal property in this state, and (2) regularly or systematically make solicitations in this state. A person meeting these requirements should obtain a Colorado Retailer’s Use Tax License or a Colorado Sales Tax License.
The piecemeal approach that we are taking just isn’t working very well. It is an endless battle that is never done. It is also using all of our time and energy when we have many other critical issues to address.
{ 4 comments… read them below or add one }
Melanie,
Thanks for the mention and the link to my blog. I wanted to clarify the alleged $100,000 gross receipts threshold.
Colorado’s emergency regulations and the original statute do not agree. Therefore, it is currently unclear if the $100,000 gross receipts exemption exists.
I udpated my blog post to address this issue.
If you have any questions, please contact me.
Thanks again.
Brian
Thank you for the additional information. It is so important that I added a note to the beginning of my post telling everyone to make sure they read your comment and also visit your site for additional information.
This is clearly a result of the rush to pass and implement.
Thanks for stopping by Brian.
Thanks for posting this great info for everyone Mellie! One thing I would really like to stress and see more people truly grasp is that this bill applies to ALL MERCHANTS – regardless of affiliates. Merchants without an affiliate program are hit by this bill. Anyone shipping/selling to Colorado residents online… this bill is applicable to them.
I have already been dropped by two merchants because of this bill. The scary part is, if they don’t really understand the bill and just see that it passed and they react – they are not protecting themselves an in the meantime they are potentially hurting others in the process.
The bill does not require a nexus – and in theory – it also is not a sales tax at all.. the burden is on the merchant merely to report sales while the purchaser is required to pay a Use tax. The speculation of this is that legislation is hoping the burden on the merchant is too much of a bother, so they’ll simply pay sales tax rather than deal with all the reporting that will be required. This affects ALL MERCHANTS REGARDLESS of their affiliate program involvement with Colorado residence.
Thanks again for all the fabulous info sharing!
Thanks Jen. The article I referenced was one of the first I’ve read that really seemed to tell the whole story. I hope every merchant and affiliate heads over and reads it. Also reiterates the need for everyone to retain professional counsel.
Might be a good idea to email those merchants who dropped you a link to Brian’s article so they can read it firsthand.
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