Given the galloping progressivism afflicting Colorado, it’s not surprising that many of the bills working their way through the legislature layer new burdens on Colorado’s job creators. So it’s a breath of fresh air when a bill comes along to ease an existing burden, that has bipartisan sponsorship and a reasonable chance of passage.
Such a bill is SB 24-023, which would hold harmless companies that make errors in their sales tax calculations based solely on the state’s sales GIS sales tax database.
Back in 2019, the legislature passed HB-1240 and SB-006. The first bill, as described by the Denver Post at the time, requires businesses to calculate and collect sales tax for online sales for the jurisdiction within Colorado where the purchase was shipped to, including “accounting for overlapping boundaries and special taxing districts such as RTD.”
As the Post noted at the time, many small businesses were worried enough about the administrative nightmare this would create that they were beginning to shun online sales altogether. Of particular concern were the special taxing districts, of which Colorado has hundreds. It was one thing to find out the county and city or town that an address was in. But there was no convenient place to look up what other taxing districts an address might be in.
The legislature knew at the time that this was going to be a problem, so it also passed SB-6, requiring the state’s information technology office to set up a portal for looking up sales tax rates by address. It also exempted businesses with less than $100,000 in sales from the requirement until the portal was up and running. It did not, however, require home-rule municipalities to participate in the portal, though it encouraged them to do so.
All the uncertainty, administrative overhead, and potential penalties were enough to scare off many small businesses from online sales, even those near their home offices. It might have sorted itself out, but then Covid hit, in-person sales took a terrible hit, and smaller businesses that might have tried to go into online sales found themselves locked out because of the sales tax complexities.
The state did eventually get a GIS database set up for businesses to look up sales taxes. However, like all such databases, it does contain errors. It is grossly unfair for the government to penalize a business for mistakes it makes as a result of errors created by the government in the first place, and SB-23 would put an end to that.
Businesses would still be responsible for making sure that they query the database with the correct address, for example. But if they did, and the GIS failed to include a special taxing district, drawing the boundary a block too far in one direction, for example, the business would no longer be responsible the resultant under-collection.
To be honest, this bill ought to be unnecessary. Reading through some of the pre-Revolutionary pamphlets, I came across an admission from a supporter of the British Parliament that the government couldn’t hold businessmen responsible for errors originating in the government.
In other words, this wasn’t even something that was a point of contention between the American Founders and the British government.
So it’s a terrible shame that this isn’t baked into the assumptions of our current laws, but as long as it’s not, it’s good to see the state writing it into new legislation.
Joshua Sharf is a senior fellow in fiscal policy at the Independence Institute, a free market think tank in Denver.
