Colorado Tax Nexus

Businesses with nexus in Colorado are required to register with the Colorado Department of Revenue and to charge, collect, and remit the appropriate tax.

Generally, a business has nexus in Colorado when it has a physical presence there, such as a retail store, warehouse, inventory, or the regular presence of traveling salespeople or representatives. However, out-of-state sellers can also establish nexus in the ways described below.

Colorado nexus for out-of-state sellers

Affiliate nexus

If you have ties to businesses in Colorado, including affiliates, you may have nexus. A business is presumed to be doing business in Colorado if it does business with, or is part of, an entity with a physical presence in Colorado that engages in any of the following activities:

  • Sells taxable products or services under the same or similar business name as the out-of-state business
  • Maintains an office, distribution facility, salesroom, storage place or similar place of business in Colorado to facilitate the delivery of taxable products or services sold by the out-of-state person
  • Delivers, installs, assembles, maintains or repairs taxable products sold to in-state customers
  • Facilitates the delivery of taxable products by allowing in-state customers to pick up products at an in-state facility
  • Uses trademarks, service marks or trade names in Colorado that are the same or similar to those used by the out-of-state seller presumed to be doing business in Colorado.

However, this presumption does not apply to the following agreements or arrangements:

  • Advertising: A person without a direct in-state physical presence purchases advertisements to be delivered in Colorado on television, radio, newspapers, magazines, the internet or any other mass-market medium
  • Affiliate marketing agreements: Independent contractors or other representatives for a cost, commission or other consideration, directly or indirectly refer potential customers through internet promotional methods to the person without direct in-state physical presence
  • Small businesses: Sales by the person without direct in-state physical presence to in-state customers in the prior calendar year are less than $50,000

The above affiliate nexus rules apply to state-administered local jurisdictions. Affiliate nexus provisions may or may not apply to Colorado localities that impose and administer their own taxes. For an example, see nexus rules for the City of Boulder.

Use tax notification requirement

Under a much-disputed 2010 law, certain noncollecting out-of-state retailers that make sales to consumers in Colorado are required to provide an annual purchase summary to customers who purchased more than $500 in taxable goods from the seller in the previous year.  The requirement applies to retailers whose total gross sales in Colorado during the previous calendar year were at least $100,000, and who expect gross sales for the current calendar year to reach at least $100,000.

Due to ongoing litigation, the Colorado Department of Revenue does not currently enforce this provision (Supreme Court lets Colorado’s use tax notification requirement stand). However, enforcement is scheduled to begin on July 1, 2017 (Colorado use tax notification starts July 2017).

See: Marketplace Fairness and Small Business Protection Act; House Bill 1193; Supreme Court lets Colorado use tax notification requirement stand; and the Colorado Department of Revenue: Guidelines for Determining When to Collect State-Collected Local Sales Tax, and Sales Tax Information for Out-of-State Businesses.