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Colorado Considers a Uniform Sales and Use Tax


 Steamboat Springs, Colorado, is a home rule city.

 

Colorado is a home rule state. In other words, the state does not administer local sales and use tax in nearly 70 home rule cities, each of which has “their own tax policies, rates, and exemptions.” Anyone  seeking up-to-date information concerning tax rates, exemptions, license fees and procedures in home rule cities is advised (by the Colorado DOR) to contact the cities directly. That means extra work for business owners.

This situation may one day change. Lawmakers in both the Colorado House and Senate have approved HB 13-1288, known as the “Uniform Sales & Use Tax Base Act.” If approved by the governor, it would “simplify the process for dealing with certain municipal tax districts.” Or rather, it would take the first step in a “multi-year effort to simplify the process.” (Colorado Statesman).

Under the bill, the Colorado Department of Revenue would study the situation and “make recommendations to the general assembly regarding the establishment of a revenue neutral uniform sales and use tax base throughout the state.” The recommendations would have to include:

  • “A uniform definition of tangible personal property;
  • A uniform list of items that are exempt from taxation by the state and local taxing jurisdictions;
  • Uniform definitions of the tax-exempt items;
  • Rate changes…; and
  • Any other recommendations deemed appropriate by the Department of Revenue regarding the establishment of a revenue neutral uniform sales and use tax base.”

The bill stipulates that any uniform sales and use tax be revenue neutral, according to “the best information” available.

The two main sponsors of the bill, Rep. Kathleen Conti (R-Littleton) and Rep. Daniel Kagan (D-Cherry Hills), say they’re responding to Colorado businesses who “have been begging for years for a more simplified tax process in dealing with the home rule cities.” At the same time, they’re trying to honor “the home rule cities’ jurisdiction and ability to set tax rates and preserve revenue streams.”

Assuming phase one passes in the form of HB 13-1288, the next step would be a 2014 “concurrent resolution that requires voters to allow the Department of Revenue to be the single source for remittance of sales taxes for home rule cities.”

HB 13-1288 does not mention the Marketplace Fairness Act, federal legislation that would allow states to require remote sellers with more than $1 million in annual remote sales to collect and remit sales and use tax on their behalf. For now, Colorado lawmakers are focusing on Colorado businesses like American Furniture Warehouse, which “has to deal with more than 50 home rule cities on a monthly basis” and “file more than 50 returns every month and pay each city individually.” The lawmakers are focusing on making Colorado a “more business-friendly state.”

Yet hovering on the horizon is the MFA. In order to take advantage of it if it passes, Colorado must dramatically simplify its tax laws. HB 13-1288 is a step in that direction.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.