Tax Collection Responsibilities Changing in Colorado

Dec 7th, 2018

Effective December 1, 2018 tax collection responsibilities are changing in Colorado, but the Department of Revenue is allowing companies until March 31, 2019 to conform to the new rules.

The Colorado Department of Revenue recently released a notice stating that the new destination-based sourcing rules were being implemented on December 1, 2018. The word "sourcing" refers to the location where a sale takes place. The word "destination" refers to the location where the customer takes possession of property. So, destination sourcing means that a sale takes place wherever the customer takes possession of the property they bought. This is important because the rules and rates that apply to a particular sale are determined by where the sale takes place.

For state sales tax, Colorado has used destination sourcing for many years. For local sales tax, Colorado used somewhat of a hybrid sourcing rule - the rules and rates applied where the customer took possession, but only if the seller had a sufficient presence in that location. For example, if a seller in Denver sold property to a customer who picked up that property at the seller's location in Denver, then Denver sales tax would be due. If that same seller in Denver sold property and had it delivered to a customer in Colorado Springs, the seller was not obligated to collect Colorado Springs local sales tax unless the Denver seller had a sufficient presence in Colorado Springs.

Now Colorado is implementing destination-based sourcing rules for local sales tax. This means sellers must collect the combined state and local rate at the location where they deliver goods to their customers, regardless of whether they have a presence in the delivery location.

The Colorado Department of Revenue is giving sellers until March 31st, 2019 to start collecting the combined state and local rate at the delivery location for sales in Colorado.

https://www.ttrus.com/TaxCollectionResponsibilitiesChanginginColorado