Maintaining compliance with changing state tax laws can be a challenging task.

This applies not only to online companies that sell products to customers across the country, but also those with a “brick and mortar” location as well. On July 1, 2017, retailers will be required to once again adjust their tax collection process to comply with Colorado’s new tax law. Under new regulations, any out-of-state business that sells tangible personal property to Colorado customers, but is not required to collect and remit sales tax, will now be required to submit reports to both customers and the Colorado Department of Revenue (DOR). The law that originally passed in 2010 was met with several challenges in court at the state and federal level. However, the U.S. Supreme Court shut down retailer efforts by refusing to hear a case. This allowed the law to move forward and go into effect on July 1, 2017. To help clients, prospects and others understand the impact of the new law, Hanson & Co. has provided a summary of key facts below.

Program Details

The new reporting requirements apply to out-of-state companies that are not required to collect Colorado sales tax and those that sell tangible property to in-state customers. Companies that meet this criterion will be required to take the following actions:

  • Tax Requirement Notification – Inform Colorado customers that they are required to submit use tax to the Colorado DOR for qualifying purchases. The law requires that notifications be sent to qualifying customer starting on July1, 2017.

  • Submit an Annual Summary to Customers – Qualifying companies are required to submit an annual summary to each customer who spends more than $500 with the retailer. The summary needs to include purchase details, tax requirement notification and notification that the company is required to submit the customer’s name and purchase information to the Colorado DOR. The law requires the first customer summary be sent no later than January 31, 2018.

  • Submit an Annual Report to the DOR – Qualifying companies are required to submit an annual report, including customer names and total amount of purchases, to be filed no later than March 1, 2018. This requirement applies to retailers that aren’t required to collect sales tax and have $100,000 or more in gross sales revenue from Colorado customers.

Penalties for Noncompliance

Qualifying companies that don’t submit required reports to the DOR may be subject to multiple penalties. This can include a $5 fine for each failure to notify customers, $10 fine for each failure to notify the state and $10 for each customer excluded from reports filed with the state. The maximum annual penalties for these violations are limited at $25,000 for failure to notify customers and $50,000 for other failures per year. The state has indicated that penalties for noncompliance will not be assessed prior to the July 1st effective date.

Next Steps

The new Colorado tax law will mean significant reporting and other changes for qualifying online retailers. It’s important to review your tax situation to determine if you are required to comply with these new regulations. If you have questions about the new law, would like to conduct a nexus determination study or need other tax assistance, Hanson & Co. can help. For additional information please call us at (303) 388-1010, or click here to contact us. We look forward to speaking with you soon.