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By Tripp Baltz
Colorado’s experience with its first reporting deadline for remote sellers that don’t collect and remit sales or use tax means the state “still has some work to do on compliance,” a senior tax official said.
“We were disappointed with the number of reports we received,” said Phil Horwitz, director of Tax Policy Analysis for the Colorado Department of Revenue. “We did not receive as many as we expected.”
Horwitz told Bloomberg Tax April 25 that he didn’t know how many vendors complied with the reporting deadline as a percentage of those who are required to report.
Under Colorado’s 2010 reporting and notice statute, sellers that don’t collect and remit Colorado sales and use taxes must (1) notify buyers at the time of transaction that tax isn’t being collected but may be due, (2) provide consumers an annual report of their purchases, and (3) send an annual report to the department showing the total dollar amount of each buyer’s purchases. The U.S. Court of Appeals for the Tenth Circuit affirmed the law as constitutional in February 2016.
After the delay caused by the court case, the law took effect in July 2017—roughly seven years after enactment. The first reports were due to the state by March 1. Horwitz recently reviewed the numbers and shared them with members of the Multistate Tax Commission’s Uniformity Committee during the MTC’s Spring Committee Meetings in Bloomington, Minn.
“Obviously there’s still some work we have to do on compliance,” he said. “Not every vendor understands that they have these obligations, and we have to do a little more outreach and education.”
Out-of state, noncollecting vendors sent 800,000 records of transactions detailing individual sales to Colorado purchasers, including individuals and businesses, Horwitz said. One vendor was responsible for 115,000 untaxed purchases, roughly 14 percent of the total.
The total amount of untaxed purchases in the state was $250 million, amounting to about $7.5 million in uncollected taxes based on Colorado’s 2.9 percent sales tax rate, he said. “We don’t know if all were taxable, but we do know they were untaxed purchases,” he said.
That works out to an average of $300 per purchaser, although the range is wide, he said. The highest amounts were $900,000 for a single purchaser, “and then some in the $300,000 range, and going down from there,” he said.
“So there are obviously some very large taxpayers that will merit some inquiry,” he said.
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More information on Colorado's guidance for noncollecting retailers is at http://src.bna.com/yio.
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