Ensuring tax compliance on the state level can be a tall order due to the sheer number of taxes that exist, as any tax professional can attest. However, in some states, there are further compliance challenges at the local level because of “home rule jurisdictions.” These are local jurisdictions that have permission from the state government to have different levels of autonomy. One of these freedoms is imposing their own taxes. Colorado is a prime example of a home rule state, with 97 home rule municipalities.
Article 20 of the Colorado Constitution gives both counties and municipalities the ability to form home rule charters. These charters provide the structure of how the jurisdictions work, and voters must approve them.
Home rule jurisdictions in Colorado have the ability to impose their own taxes; under Colo. Rev. Stat. § 30-35-901, the state also gives home rule counties the authority to establish special taxing districts within their jurisdictions. These districts are set up in cases where a service a county is authorized to provide is only meant to occur in small areas of that jurisdiction.
In Colorado, home rule jurisdictions are responsible for administering and collecting their own taxes; in contrast, Arizona, another home rule state, is responsible for these duties for many of its home rule jurisdictions. However, these jurisdictions must follow state procedures for tax collection and enforcement.
Sales tax and hotel occupancy taxes are just some of the home rule taxes found in Colorado. Boulder, Colo.'s development excise, education excise, and housing excise taxes are also examples of home rule assessments. And in keeping with Colorado’s status as the first state to legalize (and tax) recreational cannabis, there are also home rule marijuana taxes.
With the number of home rule taxes out there, especially in Wayfair’s wake, it is crucial for practitioners to make sure they are using the most up-to-date resources to ensure compliance with all taxing jurisdictions.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What steps are you taking to make sure you are in compliance with home rule jurisdiction tax rules?
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