Colorado Sales and Use Tax Notice & Reporting Requirements

Colorado’s sales and use tax notice and reporting requirements for remote retailers…Still Alive! Previously, the District Court granted DMA’s motion for summary judgement and granted an injunction against the Department of Revenue from enforcing such requirement.  However, on February 22 the U.S. Court of Appeals for the Tenth Circuit held that the requirements do not violate the Commerce Clause.  In other words, (depending on any further litigation/appeals) Colorado can reinvigorate its efforts to force certain out-of-state retailers selling to in-state customers to:

1) notify Colorado customers that they are obligated to self-report and remit use tax on their purchases;

2) to provide Colorado customers with an annual report, detailing a customer’s purchases in the previous year;

3) notify the customer that the retailer was required to report the customer’s name and amount of purchases to the Department; and

4) report to the Department, the name, billing address, shipping address and total amount of purchases made by Colorado customers.

While Colorado has led the charge, many others states may jump on the reporting requirement band wagon.

Read Sutherland’s full legal alert outlining the background on Colorado’s Use Tax Reporting Requirements, District Court Ruling, Tenth Circuit Ruling, and the possibility of Future Congressional Intervention here.

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

Sales and Use Tax ‘Gotchas’: A Taxpayer’s Guide to Navigating

I. Introduction
According to Merriam-Webster.com, a “Gotcha” is an unexpected problem or usually unpleasant surprise and fully defined as an unexpected usually disconcerting challenge, revelation or catch. 1 A “Gotcha” is also a colloquial expression meaning ‘I’ve got you.’ In sales tax circles, a “Gotcha” is an unexpected outcome usually from an audit that seems illogical and counterintuitive. And when compared to the typical treatment of similar transactions by other states or, to a lesser extent, other tax types, is something you don’t see coming.

1 http://www.merriam-webster.com/dictionary/gotcha.

Gotchas are exceptions to the general rule. They result from activities with a high probability of error caused by the many variables that must be considered to comply with the law. Gotchas are difficult to automate and difficult to incorporate into everyday compliance activities. They touch all areas of the organization from how companies sell to how companies pay sales and use tax and everything in between.

Click here to read more: Sales and Use Tax Gotchas

July 1st Sales & Use Tax Law Changes

Law Changes Overview
July 1st marks the effective date for recently enacted legislation in many states; this means that July 1st is an important date for law changes, including sales and use tax-relevant changes. As a courtesy to their subscribers, TTR has compiled the list below of upcoming sales and use tax law changes that are relevant to items covered on the TTR website. This list is not intended to encompass each and every sales and use tax law change (some changes are technical corrections, while other changes do not impact items in any TTR library). As July 1st approaches, they will update, as needed, the taxability of any impacted TTR items on their website (as these items are updated, you will receive regular notifications in your TTR daily or weekly digest). If you have any questions, please feel free to contact your TTR sales professional.

Arkansas
Arkansas Act 1401: Arkansas will exempt certain separately metered utilities used for commercial grain and storage operations.

Arkansas Act 1402: Arkansas will exempt eligible purchases of timber harvesting equipment.

Arkansas Act 1404: Arkansas will allow a partial refund for sales or use tax paid on the purchase of machinery and equipment used to modify, replace, or repair existing manufacturing equipment.

Arkansas Act 1411: Arkansas will reduce the tax rate for sales of natural gas and electricity purchased by qualifying manufacturers and cotton gin operations.

Arkansas Act 1414: Arkansas will exempt the sale of dental appliances to qualifying dental professionals

California
California Act 93 and SB 90: Effective until July 1, 2022, California will provide a partial exemption for purchases of qualifying tangible personal property for use primarily in manufacturing, processing, refining, fabricating, and recycling tangible personal property.

Georgia
Georgia HB 900:
Georgia will exempt sales of consumable supplies that are used in manufacturing but do not become a component of the property being manufactured.

Georgia HB 816: Georgia will exclude direct mail postage and delivery charges from its definition of “sales price” so long as the charges are passed on to the purchaser and are separately stated.

Idaho
Idaho HB 595: Idaho will no longer tax sales of software delivered electronically or by a load and leave method.

Kansas
Kansas HB 2378: Kansas will expand its manufacturing exemption to include certain types of machinery and equipment used in surface mining activities.

Mississippi
Mississippi SB 2921: Mississippi will have a sales tax holiday for sales of firearms, ammunition, and hunting supplies. The holiday will occur for one weekend each September.

Mississippi HB 0260: Mississippi will remove separately stated finance and carrying charges from the definition of “sales price.” It will also remove charges for engineering services from the taxable contract price for the construction tax.

Mississippi SB 2934: Retail sales of truck-tractors and semitrailers are exempt when they are purchased for use in interstate commerce and will be registered under the International Registration Plan or a similar agreement.

New Mexico
New Mexico SB 88: New Mexico will provide a gross receipts and governmental gross receipts exemption for certain sales and rentals of durable medical equipment and medical supplies.

South Carolina
South Carolina HB 3561: South Carolina will narrow the scope of services that are subject to the 5% tax on “additional guest charges.”

South Dakota
South Dakota HB 1056: South Dakota will change the method used to calculate sales tax on used motor vehicles.

Wisconsin
Wisconsin SB 348: Wisconsin will exempt maintenance and repair services performed on aircrafts and aircraft parts.

Wisconsin AB 5: Wisconsin has enacted an exemption for radio and television broadcasters.

Colorado — Sales And Use Tax — Verifying sales tax rates through Revenue Online.

The Colorado Department of Revenue (CDOR) is reminding taxpayers that Colorado has more than 700 sales tax combinations (in addition to the state sales tax rate of 2.9%, counties, cities, and special districts have different rates) and advising them that they can use Revenue Online to find the correct sales tax rates their business should be collecting and reporting. Revenue Online offers three different services for checking the rates: (1) View Local Sales Tax Rates – taxpayers then select a city or county. When taxpayers select a city, the service also discloses the county or counties in which the city is located, and they will see the tax rates and explanations; this service is the online version of publication DR 1002 (Colorado Sales/Use Tax Rates). (2) View Business Location Rates – taxpayers enter their Colorado account number (CAN), and they will see their branch/site information, jurisdictions, and tax rates. (3) Find Local Taxes by Address. When taxpayers rely on these services to determine the tax rates they should collect, they will be “held harmless” regarding the rates they used if they print out the information and keep it in their records. These services are on the front page of Revenue Online, under “Other Services,” and taxpayers do not need to be logged into Revenue Online to use them. The CDOR also reminds taxpayers that they should check for rate changes before January 1 and July 1 each year. (Verify Sales Tax Rates Several Ways Through Revenue Online, Colorado Department of Revenue Taxation Division Weblog, 05/08/2014.)

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.

http://www.colorado.gov/cs/Satellite/Revenue/REVX/1251649097022

Colorado’s Amazon Win

In 2010 Colorado passed a law requiring internet retailers, whose gross sales exceeded $100,000, to mail annual use tax owed notices to customers that bought over $500 worth of merchandise.

Last year a lower court threw the statute out, claiming that it placed an “undue burden on interstate commerce.”

Yesterday the U.S. Court of Appeals for the 10th Circuit remanded the case back to the lower court, claiming that it had overstepped its authority, and that it had to lift the permanent injunction on the tax. The reason cited was the U.S. Tax Injunction Act, which prevents federal courts from taking on state tax disputes when a state court could handle the matter. It also prohibits Federal lawsuits that could restrain the collection of state taxes.

The suit was brought by the Direct Marketing Association (DMA); a trade association based out of New York.

If the lower court reverses the injunction, then the Amazon act will be back in effect; however the DMA could still try to get an injunction in state court.

Read more:

http://www.bizjournals.com/denver/blog/boosters_bits/2013/08/colorados-amazon-tax-isnt-back.html

http://www.denverpost.com/breakingnews/ci_23904271/colorados-internet-tax-law-scores-win-federal-appeals