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Colorado Use Tax Notice and Reporting Requirements – Batteries Not Included

05.08.17 | SALT Chat

I was all set to blog about something else, when I noticed that Colorado held a Stakeholder Work Group meeting on April 25th to get “constructive feedback and suggestions” as well as “input and insight” from those affected by and having knowledge of the notice and reporting requirements imposed on out-of-state retailers that make sales to Colorado purchasers but do not collect Colorado sales tax.  This is also known as “The Tattletale Rule”. See my previous blog posts from October 24, 2016 and February 29, 2016.

Enacted way back in 2010, but not to be enforced until July of 2017 due to a web of litigation and injunctions, Colorado enacted legislation and corresponding regulations requiring sellers with no sales tax nexus or collection obligation in Colorado, with over a certain amount of sales to Colorado purchasers, to not only notify the purchaser in exasperating detail of the fact that just because the seller didn’t collect sales tax, you still may have an obligation to remit the corresponding use tax on your own.  To add insult to injury, sellers are also being required to tattle on Colorado purchasers and inform the Department of who bought what, for how much, and when.

The Department Regulation 39-21-112.3.5 is over seven pages long — hence, my current headache.  There is so much detail that I can’t imagine how the stakeholders could even begin to comment.  I understand the states are anxious to protect their revenue base and make it clear to their taxpaying citizens that whether or not tax is collected, someone has to pay it.  So my very short and concise comments detailed below  are inspired from my childhood disappointment on receiving highly anticipated birthday and holiday gifts from well-intentioned relatives and friends who failed to read the warning on the box; “batteries not included.”

My rewrite of the Colorado Regulation would be as follows:

  • Sellers, you are not allowed to say anywhere at any time “no sales tax”
  • A clear statement on any promotional and pricing information as well as the bill of sale must clearly indicate “Sales and Use Tax is not included”
  • You can remit any tax you owe with your personal income tax return or by filing a use tax return.

Simple, to the point, no more headaches.  If you have sales and use tax questions, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.