Major Issues with Colorado’s MFA Compliance

In the event that the Marketplace Fairness Act (MFA) passes, many states must first make some changes to their tax codes before they can collect sales tax from internet retailers. These changes mainly deal with either complying with the streamline sales and use tax agreement, or making specific changes to their tax code that includes establishing a uniform sales and use tax base, and uniform tax definitions. In anticipation of the MFA passing, Colorado passed House Bill 13-1288 that requires the Colorado Department of Revenue (DOR) to work with municipalities and counties in order to create a uniform sales and use tax base as well as uniform tax definitions. Based on a stake holder meeting held by the DOR the following issues will be brought up in their report:

1)      The tax on food for home consumption and residential power account for a majority of the local jurisdictions’ revenue;

2)      In order for local jurisdictions to remain solvent and revenue neutral without experiencing huge tax increases, the State would have to remove the exemption for food for home consumption and residential power;

3)      The State currently taxes cigarettes while local jurisdictions do not.  By taxing cigarettes at the local level, this would bring an offset of additional revenue to the local jurisdictions (approx. $30.5 mill);

4)      Certain items that are currently taxed by the locals would need to be exempted.  The DOR preliminarily identified the following few items:

  • a.       Industrial energy;
  • b.      Agricultural compounds & bull semen;
  • c.       Pesticides;
  • d.      Corrective eyeglasses, hearing aids;
  • e.      Wireless Telecomm Equipment.

5)      The report will also make recommendations for creating uniform tax definitions for all items taxed or exempted and would use a majority of the definitions found in the Streamlined Sales Tax agreement (SST);

This information was provided by the Colorado Association of Commerce and Industry.


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