The Colorado Department of Revenue is revising its sales tax rules for documenting wholesale transactions. The revised rules seeks to change the amount of due diligence required for accepting resale certificates in lieu of collecting sales tax. Under the old rule, the wholesale vendor was relieved of the liability to collect sales tax when the vendor accepted in “good faith” a resale exemption certificate. Under the proposed rule the vendor is required to either verify the sales tax license number of the purchaser with the Department or collect a physical copy of the license.
The Department has until June to adopt the new rule or terminate the proceeding. This gives Colorado vendors time to review the documentation they have on file for their retail customers and if needed start collecting the proper documentation.
For assistance with complying with Colorado law, contact your state and local tax professional.