Vail Valley Partnership CEO: Sales tax rules changing in Colorado (column)
Vail Valley Partnership is a participant in the Simplify CO Sales & Use Tax Coalition, a statewide group working to ensure a fair tax environment for our member businesses. Colorado’s complex sales and use tax system is a significant burden on businesses, resulting in considerable costs to comply with a complex array of taxing jurisdictions.
This isn’t a new problem. The 2011 statewide “Pits and Peeves” Roundtable Initiative, commissioned by Gov. John Hickenlooper, found “complexity, ambiguity and resulting confusion surrounding the state’s sales and use tax regime, which makes it extremely difficult for companies to comply.”
The Colorado Chamber of Commerce and Colorado Competitive Council (both of which the VVP collaborates with on various advocacy and business issues) have also been an active proponent for a postponement in implementation of the new sales tax rules.
Good news: Colorado Department of Revenue has chosen to postpone enforcement of rules on sales and use tax collection for in-state and out-of-state retailers. Bad news: The rules will be delayed through May 31 to allow for the Colorado General Assembly to address this issue. See DOR’s statement on the postponement of implementation online.
What’s the issue, exactly?
New sales tax regulations will require all in-state and out-of-state businesses that ship taxable products to buyers in Colorado to assess, collect and remit sales taxes based on each buyer’s address. It’s a dramatic shift from the way many Colorado retailers do business now: Collecting taxes on shipped goods based on the jurisdictions they share in common with their customers.
Colorado businesses face 756 specific geographic areas with different sales tax structures, making the calculation and collection an onerous burden. And woe to those who are accused of making a mistake. Most taxpayers do not know the nuances of tax definitions until an audit.
Business leaders who deal with Colorado’s unfair, unclear and excessively complex sales and use tax regulations recognize the need for reform. Why? Because the status quo:
Is a significant burden on businesses
Unfairly requires businesses to pay tax assessments before they can contest them in a neutral court
Hits consumers with unexpected taxes after a purchase
Due to unclear guidance and differences between jurisdictions, potential sales tax revenue is under-realized by taxing authorities. These jurisdictions then attempt to recoup taxes in audits that add penalties and interest (often two to three times market rates) to back-taxes that the business often did not know were due.
Consumers are often hit with unexpected taxes after a sale — frustrating them and resulting in dissatisfaction with businesses that are just trying to fulfill a legal mandate.
Colorado ranked 39th of states on the sales tax component in the Tax Foundation’s 2017 State Business Tax Climate Index. The same report shows that only six other states allow localities to define the sales tax base. Colorado’s taxing districts create a patchwork of 756 specific geographic areas with different sales tax rates and bases created by 294 taxing jurisdictions with overlapping boundaries. This produces what the state Department of Revenue called in a December, 2013 report a “heavy burden on businesses operating in our state.”
Colorado is the only non-participating state in Streamlined Sales Tax, a nationwide effort to address the complexity in state sales tax systems.
The Department of Revenue Website has been updated recently. We encourage everyone looking for answers to continue to check the DOR website below and continue to follow and engage with the Simplify CO Sales & Use Tax Coalition through their website, https://simplifycosalestax.com/.
Chris Romer is president & CEO of Vail Valley Partnership, the regional chamber of commerce. Learn more at VailValleyPartnership.com.