Colorado sales tax changes: Small-business owners oppose new rules
Christy Fowler, owner of Loveland woodworking supply company Blue Sky Supply, captured the exasperation Friday that many business owners are feeling over forthcoming changes to Colorado sales tax collection rules.
“It makes you look at retirement a lot sooner,” Fowler said in comments delivered to state officials. “It makes you look at moving to other states to have a business.”
Fowler was one of dozens of business owners and advocates that packed a small hearing room on an upper floor of a state administration building to comment on the not-yet-finalized regulations during a rule making hearing.The draft rules take informal effect Saturday. Business officially have until March 31 to meet the new standards before facing potential audits from the state.
The new regulations will require all in-state and out-of-state businesses that ship taxable products to buyers in Colorado to assess, collect and remit sales taxes based on each buyer’s address. It’s a dramatic shift from the way many Colorado retailers do business now: Collecting taxes on shipped goods based on the jurisdictions they share in common with their customers.
Counting the state’s 344 cities, counties and special taxing entities like RTD, there are 683 possible sales tax rates in Colorado. While the Department of Revenue is the sole sales tax license issuer and collection point for a majority of those jurisdictions, 71 home-rule cities handle their own collections, including Denver, Aurora, Fort Collins and Colorado Springs.
Many who spoke Friday decried the time and financial burden of assessing and paying so many different tax rates — even with access to databases provided through the state that, if used, will make it so they are not liable for mistakes.
Laurie Hessemer, owner of Denver home improvement business Casa Verde Paint, said the sales tax software her business used today allows her to enter one tax code per customer. What used to be three codes — Colorado’s, Denver’s and local special districts — would have been 30 this year under the location-based rules. Hessemer said she is looking at untold hours of additional time spent entering data and filing local tax returns each month.
“At $50 an hour, I cannot afford to pay a bookkeeper to do this for me,” she said. “This is a setback for small business.”
The change was prompted by a Supreme Court ruling this summer that did away with the federal physical-presence standard for sales taxes collections. Out-of-state retailers who do at least $100,000 in sales or 200 transactions annually will be required to comply in Colorado. No such threshold exists for local business, another issue that drew fire Friday.
“The remittance of tax regulations puts an undue burden on Colorado business and does not level the playing field,” said Peter Novak, co-owner of Longmont artisan jewelry business RockHill Designs. “Many out-of-state business will not follow the regulations.”
The state has invested $175,000 in a software upgrade to allow business to turn on collections for state-collected jurisdictions through the DOR website, created instructional webinars and enacted the enforcement grace period with aims to “make it as easy as possible for businesses to comply with the new rules,” Department of Revenue executive director Michael Hartman said. Hartman said the grace period will also allow the Colorado General Assembly to provide guidance after it convenes for its 2019 session.