Colorado’s Sales and Use Tax System and the home-rule impact
Colorado taxpayers may have additional sales tax collection and filing responsibilities. We urge you to review and monitor activity within the state for appropriate compliance.Colorado recently released its attempt at a single, state-level point of tax administration, as mentioned by the U.S. Supreme Court in the 2018 Wayfair decision.[1] This program, the Sales and Use Tax System (SUTS), provides a single point of registration and remittance for all state-administered local sales and use taxes in addition to self-collecting, or home-rule, jurisdictions that agree to participate. To date, home-rule participation in the SUTS has been the minority, but increased participation is expected.[2] Notable home-rule jurisdictions that have agreed to participate as of August 31 include Colorado Springs, Englewood, Fort Collins, and Golden.[3]
Home-rule participation is notable for two reasons:
- It simplifies the tax compliance burden for businesses operating in participating jurisdictions.
- It may subject businesses to a home-rule collection responsibility without otherwise establishing nexus in a home-rule jurisdiction.
The justification for this newfound collection responsibility comes from the Colorado Municipal League’s (CML) Model Ordinance on Economic Nexus and Marketplace Facilitators (Model Ordinance), which has been adopted by 14 home-rule jurisdictions.[4] Among other augmentations, the Model Ordinance expands a jurisdiction’s definition of “engaged in business in the city” to include, for out-of-state sellers, “retail sales sufficient to meet the definitional requirements of economic nexus.”[5] “Economic nexus” includes a seller having over $100,000 of retail sales in the current or preceding calendar year.[6] Retailers with a physical presence in Colorado are “engaged in business in the city” if they make more than one delivery in the city within a 12-month period.[7] Therefore, jurisdictions adopting the Model Ordinance require businesses with nexus in the state of Colorado to register and collect sales tax on sales in the local jurisdiction. This establishes a significant variance from the historic physical presence nexus requirement employed by home-rule jurisdictions.
Colorado taxpayers must monitor sales into home-rule jurisdictions as well as jurisdictions’ adoption of the Model Ordinance to ensure proper sales tax compliance within Colorado. Taxpayers with sales into adopting jurisdictions should register and begin collecting sales tax on sales delivered into these jurisdictions. Model Ordinance adoption should be monitored in all other home-rule jurisdictions where a business has taxable sales.
Additional information about the SUTS can be found here, and registration for SUTS can be requested by emailing DOR_TaxInfoEmail@state.co.us.
[1] South Dakota v. Wayfair, Inc., et al., 585 U.S. (2018) at 23.
[2] 27 jurisdictions have agreed to participate as of Aug. 31, 2020. Co. Report on Home-Rule Municipalities’ Participation in SUTS for August 31, (8/31/20).
[3] A full list of participating jurisdictions can be found at https://www.colorado.gov/pacific/tax/SUTS-Status-Updates.
[4] As of Sept. 29, 2020, the CML identified the fourteen adopting jurisdictions as Glenwood Springs, Silverthorne (eff. 7/1/20); Pueblo (eff. 8/1/20); Black Hawk, Golden, Gunnison, Snowmass Village, Winter Park (eff. 9/1/20); Longmont (eff. 9/7/20); Sheridan (eff. 9/31/20); Carbondale, Mt. Crested Butte, Vail (eff. 10/1/20); and Fort Collins (eff. 11/1/20).
[5] Model Ordinance Section 1, (as of July 9, 2020).
[6] Model Ordinance Section 1, (as of July 9, 2020); Colo. Rev. Stat. §39-26-102(3)(c).
[7] Model Ordinance Section 1, (as of July 9, 2020).
