The Colorado Department of Revenue is delaying enforcement of the state’s sales tax collection rules from March 31 until at least May 31; the state’s regulations had informally taken effect on Dec. 1, roughly four months before enforcement was set to begin.
Officials said in a statement that they hope the additional months will give retailers time to voluntarily comply with the state’s complicated sales tax system. That system, which is made up of roughly 700 taxing jurisdictions, is markedly distinct from the South Dakota system. The relative simplicity of the South Dakota system is one of the factors that led the U.S. Supreme Court in June to rule that states and local governments could require online retailers to collect sales tax even if they don’t have a physical presence, or nexus, in the state or local tax jurisdiction.
The Colorado law requires online retailers that do not have a physical presence in the states to collect sales tax if they generate more than $100,000 of gross sales or services and at least 200 transactions annually in the state.
“This is an opportunity to simplify sales tax for all parties: for businesses that collect and remit sales tax, for customers who pay it, and for those of us in state government whose obligation it is to carry out the tax laws passed by the state legislature,” says Mike Hartman, Colorado Department of Revenue executive director. “No one desires a streamlined and simplified sales tax collection and compliance system more than the Department of Revenue.”
While the delay was welcomed by some industry groups, at least one remains skeptical about Colorado’s long-term plan.
“This is a welcome holiday present from the Department of Revenue, but Colorado small businesses will not breathe a big sigh of relief until they see what lies ahead in the coming months,” says Tony Gagliardi, National Federation of Independent Business‘s Colorado state director. “The South Dakota v. Wayfair decision handed down earlier this year by the U.S. Supreme Court now allows states to collect online sales taxes from online sellers. Our Department of Revenue took it as a shot from a starter’s pistol to begin a mad dash to a finish line that wasn’t clearly marked. Rightfully, the department has decided to slow down, but not before causing a collective anxiety in a state that already has a mess of a sales tax structure with more than 700 taxing entities. ”
Read about how e-retailers are navigating the hodgepodge of state laws and regulations in Internet Retailer’s October issue cover story, “The Supreme Court overturned Quill. Now what?” or listen to an Internet Retailer webinar on the topic here. You can find additional resources and research available here.