New sales tax rule could significantly increase costs, harm businesses
By Rachel Beck
Vice president, government affairs
Colorado Springs Chamber & EDC
CHAMBER SUCCESSFUL IN EXTENDING IMPLEMENTATION OF BURDENSOME NEW SALES TAX RULE
Background
The “Wayfair Decision” (17-494 South Dakota vs. Wayfair) handed down by the Supreme Court will allow city, county, and state governments to collect sales tax from businesses operating on the internet. Previously, sales taxes were only paid if a business had a physical location in the state where the goods were sold. In response, the Colorado Department of Revenue adopted new sales tax rules, effective Dec. 1, that require businesses to collect state and local sales tax based on the tax rates at the point of delivery, including applicable special district taxes, in all of Colorado’s hundreds of taxing districts.
State called upon to extend implementation and increase education
In response to member concerns, I testified at a Nov. 30 Department of Revenue hearing held in Denver on the proposed rule, which was implemented Dec. 1. The Colorado Springs Chamber & EDC joined the Colorado State Chamber, State Senator Bob Gardner, State Representative Terri Carver, and a host of others in urging the DOR to delay implementation of the rule.
Among the comments DOR received was one from the manager of a local engineering firm, who wrote, “Although I understand your motivation to avoid a tax loophole, as a manager of a very small business, I find its implementation strangling.” A CPA for a local manufacturing company said, “We could work with a third-party vendor to collect the data [that DOR is requiring], which would essentially render our distribution business unprofitable.”
At the hearing, I told the DOR that while the Chamber supports fair and comprehensive tax collection, as well as leveling the playing field between online retailers and small businesses, we are very concerned about the rule’s approach and implementation. The Dec. 1 compliance date, two-thirds of the way through a reporting quarter and at the peak of retail season, is increasing burden and expense to businesses. The significant costs and administrative hassles Colorado Springs businesses face to comply are significant, and in some cases, businesses do not think they have the ability to comply at all.
We called on the Department of Revenue to delay implementing new rules until three things happen:
- The legislature has a chance to finish the work it started this summer to simplify the sales and use tax-collection process.
- The infrastructure is in place to make the system work for businesses, including the development and testing of tools to make understanding and complying with these regulations easy; and
- DOR communicates the changes better to those affected, including retailers and CPAs.
DOR announced late last week that they will extend a grace period to comply with the emergency rules to May 31, 2019, and will evaluate the need for another extension at that time. During this period, the Chamber will continue to advocate for a more business-friendly implementation process, and appreciates your continued suggestions on how to make the process work for you.
Click here to learn more about the new rule at the DOR’s Division of Tax website . Please note this post should not be construed as tax advice or council. We encourage you to consult your CPA, attorney or other tax expert for tax advice and provide your feedback to DOR at dor_taxrules@state.co.us as you implement new collection processes.