In previous Nexus Corner articles, we’ve discussed traditional sales tax nexus standards. Because the states are experiencing budget shortfalls and are seeking to recoup unreported or uncollected sales taxes, some are becoming creative in expanding their reach in order to collect the tax.
As an example, the State of Colorado enacted legislation in early 2010 requiring certain out of state retailers who do not collect Colorado sales and use tax to inform customers of the consumer’s use tax reporting and must provide the annual dollar amount of purchases made from the retailer. Colorado House Bill 2010-1193 did not change the requirement for retailers that were or are required to collect Colorado sales or use tax.
Specifically, out-of-state retailers that are not required to collect Colorado sales or use tax and choose not to collect Colorado sales or use tax (i.e. no sales tax nexus/physical presence) and have total annual gross sales in Colorado of $100,000 for customers that have more than $500 in annual purchases must:
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Inform customers that they are required to self-report use tax on all nonexempt purchases on which the retailer does not collect sales tax. This message must be conveyed on the invoice itself near the total amount due.
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Send year-end statements by January 31 to Colorado customers totaling the purchase amount for the previous year and inform the customer that this amount is being reported to the Colorado Department of Revenue, and
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By March 1 of the following year, report the Colorado Department of Revenue the annual totals described above, along with the customers’ billing and shipping addresses.
Depending upon the circumstances, penalties for not providing notice on the invoice may reach a maximum of $50,000 and failure to provide the annual dollar amount of purchases may reach a maximum of $100,000.
Although these requirements have recently been challenged in the court system, they are currently in effect, and more importantly, reflect the current thinking of some state collection efforts.
For more information, please contact your BC Engagement Executive or contact Theresa Mullen, State and Local Tax Leader at 330.266.4129. |
