Local Tax Jurisdiction Nexus for Leased Property

2015-02-10 20:15:59 DOR TaxInfoEmail

The Colorado Department of Revenue is revising guidance on the collection of local sales and use taxes on leased tangible personal property.

Unlike mere delivery of goods by a common carrier into a jurisdiction, a lessor who leases property on a continuous basis in a local jurisdiction has a substantial business presence within that local jurisdiction. For a more detailed discussion of this issue, see General Information Letter GIL-14-013 . The department will apply this new guidance to leases made or renewed on or after July 1, 2015.

In a previous version of FYI Sales 56, the department stated that leased property within a local jurisdiction was not a business presence for purposes of nexus. As part of its on-going review of FYIs and other publications, the department reviewed this guidance and determined that it does not reflect Colorado statutes or contemporary legal precedence regarding nexus.

For information about setting up a local tax jurisdiction account, see the Colorado Taxation general information Web site, http://www.TaxColorado.com and view Sales Tax | Account/ License , Add Locations (Sites) to Your Sales Tax Account: https://www.colorado.gov/pacific/tax/sales-tax-account-license

Potential Telephone and Email Scams regarding state taxes

Telephone Scam
The Colorado Department of Revenue would like to alert taxpayers of a possible telephone scam from a party fraudulently representing themselves as the Colorado Department of Revenue.

The caller may identify themselves as “State Tax Investigation Department.” They will state that you may have a legal case file against your name and Social Security number, have violated banking regulations, or have cheated on tax credits. They will ask you to wire them a large sum of money, usually through a convenience store debit/credit card and will require you not to tell anyone or take the matter to court.

This is NOT a call from the Colorado Department of Revenue.

We do not contact taxpayers over the telephone and request credit card numbers through a pre-paid debit/credit card to pay an outstanding tax balance.

When a taxpayer owes state taxes, the department will send written notification through a series of letters mailed to the taxpayer’s address. When the taxpayer does not respond, our Tax Auditing and Compliance Division will attempt to collect the outstanding debt.

We advise against sending any party money who claims they can clear up a tax issue with a convenience store debit / credit card.

Email Scam
Email messages from the State of Colorado Department of Revenue never have personally identifiable or financial information in the messages.

In order to verify financial information with the department, a taxpayer is required to log onto Revenue Online, the state’s free tax filing and account management Web service. Any email messages submitted through Revenue Online between the department and the taxpayer are secure. Responses between the taxpayer and the department occur within the Revenue Online service.

We do send general tax information by email. Note that the message will be from a State of Colorado email address (@state.co.us).

How to Report Suspicious Activity
If you receive or your tax client (tax professionals) receives a telephone call or email message telling you state tax is owed and you are suspicious about the party who is making the contact, you may report it to our Criminal Tax Investigation Section.

Similar scam alerts have been issued by the IRS. Please refer the IRS Warning Web page if the person contacting you states they are from the IRS.

Injunction Against CO’s Remote Seller Reporting Requirement Expires!

The notice bellow comes form the Colorado Department of Revenue:

In 2010, the Colorado Legislature passed HB 10-1193, establishing reporting requirements for non-collecting retailers. The Department adopted regulation 39-21-112.3.5, regarding the administration of those requirements. The State’s law was challenged in federal court and the court entered an injunction enjoining the Department’s enforcement of the law and regulations. That injunction was dissolved on December 10, 2013.

This notice is intended to provide guidance to non-collecting retailers regarding their obligations under the law and regulation.

Because the law has until recently been under an injunction prohibiting enforcement, the Department will not enforce any penalties for failure to comply during the period the injunction was in place. Specifically, the Department will not assess penalties for failure to comply with the law for calendar years 2010 through 2013. The Department also will not assess penalties for a retailer’s failure to comply with the January 31, 2014 deadline to provide annual purchase summaries to their customers or the March 1, 2014 deadline to provide the annual report to the Department for their 2013 purchases.

The Department is cognizant of litigation challenging the law in state district court, including the request by the Direct Marketing Association for a preliminary injunction against enforcement of the law. Should the law become subject to an injunction, the Department will review the scope of the injunction and, if necessary, provide further guidance regarding enforcement.


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) www.streamlinedsalestax.org;

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