Amazon to Collect Colorado Sales Tax, February 2016
- Jan 22, 2016 | Gail Cole
An Amazon spokeswoman confirmed the news in an email to The Denver Post: “I can confirm that Amazon will be required to collect sales tax in Colorado beginning on Feb. 1.” The Colorado Department of Revenue has also reportedly confirmed the news.
This is a big deal.
Colorado instituted a use tax reporting requirement for certain out-of-state sellers (including Amazon) in 2010, in an effort to more easily collect tax on these sales. It required non-collecting remote vendors that make at least $100,000 in total gross sales in a calendar year to “give notice to all Colorado purchasers that Colorado sales or use tax is due on all purchases that are not exempt from sales tax.” It also required sellers to provide an annual report of these sales to the Colorado Department of Revenue, which would help the department with its use tax collection efforts. Use tax compliance among individuals is generally very low.
The requirement was challenged by the Direct Marketing Association (on behalf of Internet sellers) and a lengthy legal battle ensued. In March 2015, the United States Supreme Court decided the lawsuit could proceed in federal court. In a concurring opinion, Justice Kennedy suggested the time is ripe to reconsider policies that prevent states from collecting the taxes due on out-of-state sales.
The use tax notification requirement is on hold in Colorado while the case is being decided. News that Amazon has agreed to collect renews interest in that case.
The big question
As of now, it is unclear whether or not Amazon will collect local sales taxes. Sales tax compliance in Colorado is notoriously complex, given the hundreds of local jurisdictions and the fact that many localities administer their own sales and use tax. It will be relatively straightforward for Amazon to collect the state sales tax; collecting local sales tax would be more complex.
Watch Will’s Whiteboard, The Crazy-Making States, for more on Colorado local sales and use tax.
Learn how sales tax software facilitates compliance in all states, including Colorado.