Tampons: Taxable in Colorado but exempt in Denver

Tampons: Taxable in Colorado but exempt in Denver

Feminine hygiene products will be exempt from city sales tax in Denver, Colorado, starting July 1, 2019. However, these products will continue to be subject to Colorado state sales tax as well as Denver’s cultural facilities tax and the Regional Transportation District (RTD) tax.

Like many cities in Colorado, Denver is a home rule city that administers and collects its own local sales and use tax. As such, it has the authority to determine the taxability of products and services — and city officials have unanimously agreed to exempt feminine hygiene products, defined as “products that are designed to absorb or contain menstrual flow.”

The exemption will apply to familiar products such as menstrual cups, pads, sponges, and tampons. Newer products such as menstrual discs and menstrual underwear will also be eligible for the exemption. The exemption doesn’t apply to products designed for incontinence and urine flow protection (e.g., diapers).

Will this impact out-of-state businesses?

This change could impact all businesses that sell qualifying products in Denver, even some based in other states.

According to the Denver Treasury, “Businesses located outside the City and County of Denver are required to be licensed to collect and remit the Denver Retailer's Use Tax on taxable Denver retail sales if they are engaged in business within Denver, unless provided otherwise by the U.S. Constitution. ‘Engaged in business in the City’ means performing or providing services or selling, leasing, renting, delivering or installing tangible personal property, products or services, for storage, use or consumption, within the city.”

On June 21, 2018, the Supreme Court of the United States determined that having a physical presence in a state is not the sole requisite for sales tax collection. Thus, businesses can now be required to collect and remit sales tax in states where they have no physical presence.

Following the Supreme Court decision, Colorado imposed a sales tax collection obligation on remote businesses with more than $100,000 of taxable sales into the state in the past calendar year. Remote businesses that don’t sell that volume into the state aren’t required to collect Colorado sales tax. Those that do must collect the tax rate in effect at the location of the consumer as of June 1, 2019.

The same $100,000 threshold applies to in-state sellers. Those that surpass the threshold are required to collect the tax due at the location of the consumer as of June 1, 2019. In-state sellers with less than $100,000 in sales during the past calendar year aren’t freed from an obligation to collect as are small out-of-state sellers. However, they can source the sale to their business location rather than the location of the consumer.

Learn more about the evolution of economic nexus in Colorado.

Colorado lawmakers considered a state sales tax exemption for feminine hygiene products in 2017, but the measure failed to pass.

Sales tax software reduces the complexity and burden of sales tax compliance for businesses of all sizes, in all states. Learn more.

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