Simplify Tax
Colorado Sales and Use Tax

Simplify Colorado Tax

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Resources

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Local Sales Tax audit from the Colorado Office of the State Auditor

From the State Auditor's report:

  • The Department of Revenue (Department) can improve its administration of local sales taxes by developing geographicinformation-system (GIS) resources to ensure that businesses are properly registered to the applicable local tax jurisdictions and to assist businesses in determining the amount of sales taxes that should be applied to sales in each location.

  • The Department likely did not register 11,070 of the 103,836 retail business sites we reviewed (11 percent) to the proper local jurisdictions based on addresses provided to the Department on their sales tax license applications. Of these, about 3,750 sites were likely misregistered for jurisdictions where the Department collects sales taxes, which we estimate resulted in about $3.3 million in over-collections and $3.8 million in under-collections during Calendar Year 2014.

News coverage from the Denver Business Journal, Dec. 7, 2015:

Coalition to Simplify Colorado Sales Tax and NFIB Telephone Town Hall

This is the audio recording from a telephone town hall meeting hosted by the Coalition to Simplify Colorado Sales Tax and NFIB on April 28, 2015. Topics discussed include coalition formation and Senate Bill 279.

COST List of Legislative Targets for 2015 (see p. 11-12)

Excerpt regarding tax administration gives Colorado state tax administration an overall grade = D for the following reasons:

  • No independent tax tribunal

  • Pay-to-play (taxpayer must pay an assessment or post a bond to reach an independent court)

  • Interest rates not equal for underpayment and overpayment

  • Local sales tax administration creates onerous interpretive and compliance burdens including use of outside attorneys to prosecute tax cases

  • Federal waiver extends period for CO DOR to conduct audit

Colorado Department of Revenue report: Uniform Sales and Use Tax Base Throughout the State, 2013

Significant work has already been completed to produce a report of how Colorado could obtain uniform definitions in a revenue-neutral way as a starting point to reducing some of the complexity.

Currently, Colorado has nearly 300 taxing authorities with differing sales and use tax bases, but when overlapping boundaries are taken into account, there are over 700 areas with different rates and bases (Appendix B: Taxing Jurisdictions in Colorado). This situation produces a heavy burden on businesses operating in our state.

To address the lack of uniformity among the sales and use tax bases throughout Colorado, while respecting the needs of local taxing jurisdictions, HB13-1288 was proposed by Representative Kathleen Conti, Representative Daniel Kagan, Senator Pat Steadman, and Senator Owen Hill.

HB13-1288 requires the Department of Revenue, with collaboration from organizations that represent counties and municipalities, to prepare a report by December 31, 2013, regarding the establishment of a uniform sales and use tax base throughout the State.

This report must include:

  • A uniform list of items that are exempt from taxation by the State and local taxing jurisdictions

  • Uniform definitions of the tax-exempt items

  • Rate changes, including consideration of rates of zero percent that would be necessary to achieve revenue neutrality for the State and any local taxing jurisdiction

  • A uniform definition of tangible personal property

  • Any other recommendations deemed appropriate by the Department of Revenue regarding the establishment of a revenue neutral sales and use tax base

The Best and Worst of State Tax Administration, COST Scorecard on Tax Appeals & Procedural Requirements, 2013 (see p. 2)

“No Prepayment Required: Taxpayers should not be required to post bond or pay a disputed tax before an initial hearing. It is unfathomable that taxpayers may still be denied a fair hearing before being deprived of property (i.e., disputed taxes). It is inherently inequitable to force a corporate taxpayer to pay a tax assessment, often based on the untested assertions of a single auditor or audit team, without the benefit of a hearing and the ability to establish a record before an independent trier of fact.

Colorado "Pits and Peeves" Roundtable Initiative, 2011

Excerpt from #2. Regulatory Inefficiencies and Delays, pg. 16:

The sheer complexity of regulations was identified as another cause of red tape. One example provided was the complexity, ambiguity and resulting confusion surrounding the State’s sales and use tax regime, which makes it extremely difficult for companies to comply. As noted in one Roundtable session, Colorado has the reputation as being one of the most difficult states to navigate in this regard. Trying to determine a company’s tax obligation is often so burdensome that companies have come to expect that the issues will only be resolved through an audit. However, audits are very expensive, cumbersome and time consuming. There is a clear need for greater clarity, predictability and consistency in the design, implementation and enforcement of the State’s sales and use tax regulations.

In addition, the taxing systems which businesses face in Colorado are further complicated by the varying county and local rules and regulations pertaining to sales and use taxes. It was noted that in some cases, the same item of personal property is categorized, assessed and taxed differently among the several taxing authorities.

Excerpt from Longmont Roundtable, July 13, 2011, pg, 83:

Other participants, particularly business owners and local government leaders, agreed that Colorado’s sales and use taxes, including its collection system, are in serious need of revision and streamlining.

Excerpt from Item #143, Appendix B, Summary of issues, pg. 71:

For example, we provide services to a mobile business that grosses about $80,000 a year, and has to file eleven different sales tax reports monthly ‐ and even more on a quarterly basis! Even as dysfunctional as the State of California is, there is a centralized system for the definition of taxable items, the assessment and collection of taxes, and the audits of the returns for compliance purposes. With the sales tax issue on internet sales hitting at the national level, and Amazon and other virtual retailers looking for simplicity to collect and pay the taxes, Colorado's home rule approach is outdated, cumbersome and costly.

Colorado's Sales and Use Tax Rates guide, Colorado Department of Revenue

This ten-page documents summarizes the rates and some high-level exemptions for counties, cities, and various special districts. The last three pages list the 69 home rule cities that collect and determine their own tax structures and remittance. This listing does not indicate which home rules have use taxes and what that rate is. Further, it instructs businesses as follows:

“Direct contact with these home rule cities is suggested to receive up-to-date information concerning their tax rates, exemptions, license fees and procedures.”

Tax Foundation's 2015 State Business Tax Climate Index