DENVER — Freshman State Senator Rob Woodward, R-Loveland, introduced a bill Tuesday aimed at providing relief to small business owners who say they are severely impacted by a recent Colorado Department of Revenue (DOR) sales tax policy change.
In 2018, the DOR announced it would begin enforcing a sales tax policy that demanded retailers collect and remit sales taxes based on where the customer receives the product.
Since the decision, the DOR has received many complaints from business owners who say the new enforcement will cost them thousands of dollars in expenses. In response, the DOR has put the collections on hold.
For example, a bookstore in Estes Park that gets an order for a $10 book from a customer in Berthoud would need to research the sales tax rate for that customer’s home address, collect the proper tax amount, and then submit those taxes to Berthoud at the end of the month. If the store sold to just that one customer it still would need to fill out all the proper forms for Berthoud and submit 77 cents in sales taxes.
Business owners say it’s cumbersome, time consuming and costly because there is no data base or easy way to look up the different tax rates and forms.
Woodward’s bill would exempt Colorado businesses from the first $100,000 of out-of-jurisdiction sales.
That aligns Colorado policy with a U.S. Supreme Court ruling in South Dakota v. Wayfair that said online retailers with more than $100,000 in annual sales and no physical presence or employees must collect and remit sales taxes based on the customer’s home address.
“Colorado small businesses will breathe a sigh of relief if I can navigate this bill through the Legislature,” Woodward said.
Woodward, who said the decision to collect the taxes based on the customers home address was not based on legislation but a unilateral decision by the DOR, said the problem is exacerbated by a complex tax structure and more than 700 tax rates across the state.
“They are setting up Colorado small business for a task that will be expensive and time consuming,” Woodward said. “That will certainly result in violations and penalties because it will be near impossible to determine the sales tax for every address in the state.”