Does Colorado require remote sellers to collect sales and use tax on sales of goods or services made into your state?
In Colorado, with limited exceptions, all retailers must collect, account for, and remit state-collected sales taxes on taxable sales delivered to customers in the state (Colo. Rev. Stat. Ann.[FS(P1] § 39-26-105(1)(a)(I)(A), (B), and (1.5)). A retailer (or vendor) is “a person doing business in this state known to the trade and public as such, and selling to the user or consumer, and not for resale” (Colo. Rev. Stat. Ann. § 39-26-102(8)) (emphasis added).
Doing business in Colorado means selling, leasing, or delivering (or any related activities) in the state tangible personal property or taxable services by a retail sale for use, storage, distribution, or consumption within Colorado (Colo. Rev. Stat. Ann. § 39-26-102(3)). All retailers, including remote retailers that meet Colorado’s economic nexus standard, must obtain a sales tax license issued by the Executive Director of the Colorado Department of Revenue (Colo. Rev. Stat. Ann. § 39-26-103).
Does Colorado have an economic threshold, and what is the threshold measurement period?
Under Colorado law, the threshold measurement period is the current and prior calendar year (Colo. Rev. Stat. Ann. § 39-26-102(3)(c)). The remote seller must register and collect and remit Colorado sales tax on taxable transactions that occur on the first day of the month following the ninetieth day after the threshold was met in the current year.
For example, if a remote seller did not meet the economic nexus threshold in 2020, but by June 15, 2021, their sales delivered to Colorado residents surpassed $100,000, their sales tax requirements would begin on October 1, 2021 (the first day of the month following the ninety-day mark of September 13, 2021). The retailer’s collection and remittance requirements would continue for all sales delivered to Colorado residents through at least December 31, 2022, because the “previous calendar year” threshold was met in 2021.
If a remote seller meets the economic threshold during the current year, does Colorado specify when and for how long the tax obligation applies (either by statute, regulation, or guidance)?
The remote seller must register and collect and remit Colorado sales tax on taxable transactions that occur on the first day of the month following the ninetieth day after the threshold was met in this calendar year.
Because Colorado’s threshold is met in either the current or preceding calendar year, if the threshold is met in the current year, the collecting and remittance requirements continue through at least the end of the following year.
If a remote seller does not meet the economic threshold in Colorado requiring the collection and remittance of sales tax, is it subject to notice and reporting requirements?
A remote seller that does not meet the economic threshold may voluntarily register to collect and remit Colorado sales and use tax. If a remote seller does not collect sales tax on a taxable sale delivered to Colorado, the purchaser must report and remit use tax.
Colorado imposes a three-part notice requirement on non-collecting retailers that sell tangible personal property to Colorado purchasers and do not collect Colorado sales or use tax (Colo. Rev. Stat. Ann. § 39-21-112(3.5); 1 Colo. Code Regs. § 201-1:39-21-112(3.5)).
The required notices are:
- Transactional notice. Retailers must provide a notice during the purchase that states, at a minimum, that (1) the retailer does not collect Colorado sales or use tax, (2) the purchase is not exempt from Colorado sales or use tax merely because it is made over the internet or by other remote means, and (3) the State of Colorado requires purchasers to report all purchases taxable in Colorado for which no tax was collected by the retailer and pay tax on those purchases (1 Colo. Code Regs. § 201-1:39-21-112(3.5)(4)(c)).
- Annual purchase summary. By January 31 of each year, retailers must send all Colorado customers an annual report summarizing the customer’s reportable purchases for the prior calendar year. The details of what retailers must include in an annual purchase summary are listed in 1 Colo. Code Regs. § 201-1:39-21-112(3.5)(5)(a)(ii).
- Annual customer information report. Non-collecting retailers that are required to provide at least one annual purchase summary to a Colorado purchaser must file an annual customer information report with the Colorado Department of Revenue containing summarized information for all Colorado customers. The details of what retailers must include in the annual customer information report are listed in 1 Colo. Code Regs. § 201-1:39-21-112(3.5)(6)(a).
For additional information on Colorado use tax, see Colorado Department of Revenue:
- Consumer Use Tax Retailer Reporting Requirements.
- Colorado Consumer Use Tax Guide.
- Consumer Use Tax Frequently Asked Questions.
Anderson & Jahde has decades of experience navigating Colorado Sales & Use Tax. Give us a call at 303-782-0003 to learn more.