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Saturday, November 20, 2010

More on Colorado Use Tax Collection Approach

The Colorado Department of Revenue recently issued FYI Sales 79 - Sales of Taxable Items Over the Internet to provide specific guidance on which sellers are required to provide information to customers, such as on invoices, and file an annual report listing particular information about customer purchases for the year. For some reason, the information is not easily found on the Colorado DOR website - but here is their page with a few links about this reporting requirement that was enacted earlier in 2010.

This new Colorado system is a new approach to trying to improve use tax collection. They are not requiring the remote vendors to collect the use tax, but to help the state know about some of the people who owe it. (See my prior post - here.)

The Colorado rule applies to remote (non-present) vendors with annual gross sales of $100,000 or more to Colorado customers. Such sellers must provide a statement that is easy to find that is located near the price charged. The statement must note:

  • The seller does not collect Colorado sales or use tax.
  • The purchase is not tax-exempt just because it was purchased over the Internet.
  • Colorado purchasers must self-report use tax at the end of the year.

The vendors must issue an annual report to Colorado and the customer if sales to that customer for the year exceeded $500. For details and examples, see the Colorado FYI Sales 79 document.

Is this a good approach? Well, it will help educate more people about the use tax? Why doesn't the state of Colorado just give vendors a link to add to their order page or a pop up page so that customers will know about the use tax with even less effort required of the vendor.

A problem will if more states do the same but with different rules. The MTC has a draft law - here.

Also, what about buyers that do not get the annual statement, do they get a hidden message that use tax is not owed?

What do you think?

1 comment:

Peter Reilly said...

Somehow I doubt this is going to get the revenue flowing, but I guess it is good education