Sales tax changes for retailers take effect June 1, 2019 in Colorado

Courtesy: RetailerNOW magazine

Colorado will require retailers to use destination sourcing for determining applicable sales taxes beginning June 1, 2019. Further, the new law requires all businesses with retail sales over $100,000 in the previous calendar year to collect applicable sales tax, regardless of the distribution channel used to deliver the product and physical location of the company.

That means the new sales tax collection requirements will now apply to some online sellers.

Destination sourcing method determines sales tax rate to charge

Sales tax must be collected and remitted based on the jurisdiction’s tax rate at the point of delivery for the taxable good when taxable goods are delivered to a Colorado address outside the retailer’s jurisdiction, also known as destination sourcing.

For example, if a retailer delivers taxable goods to a customer’s address, sales tax must now be collected at the rate effective for the customer’s address, not the taxes that are in common between the customer’s address and the seller’s location.

Temporary exemptions for retailers include:

  • Small businesses physically located in the state of Colorado that had less than $100,000 in retail sales within the state during the previous calendar year, until such time that the Colorado Department of Revenue can facilitate a technology solution for looking up sales tax rates for a specific address.

  • Small businesses that exclusively use an online marketplace facilitator* would be exempt from collecting and remitting sales tax for sales made in the state of Colorado. The responsibility for collecting and remitting sales tax would fall to the marketplace facilitator.** For additional information regarding the new sales tax law, visit the sales tax page for out-of-state retailers. 

Our partners at Avalara can help you wade through all of the complex sales tax changes that will affect all of your businesses, whether you’re selling online or in a store. You will have peace of mind that you’re collecting the right amount of taxes as required by law. Contact us for more information.

* A business that conducts retail sales through a marketplace facilitator, but also conducts retail sales through other means such as their own retail store, may still be liable for collection and remittance of sales tax for sales not conducted through the marketplace.
** The provision for marketplace facilitators doesn't go into effect until October 1, 2019.