DENVER — When a new state computer database is up and running later this year, businesses will have an easier time determining what sales tax rates they’re supposed to assess on their internet and catalogue sales.
And under a bill that won preliminary approval in the Colorado House on Tuesday, those businesses won’t be penalized if the rates they use from the database aren’t quite right.
The measure, HB1023, is part of an ongoing effort by state officials to simplify the state’s complicated sales tax laws, which now call on businesses to assess rates based on point-of-delivery, rather than rates used for in-store sales.
“In Colorado, vendors are responsible for the collection and payment of taxes on the goods and services that they sell, and we are starting a brand new GIS system that will help simplify that system dramatically,” said House Assistant Minority Leader Kevin Van Winkle, R-Highlands Ranch, who introduced the bill with Rep. Tracy Kraft-Tharp, D-Arvada.
“As you know, Colorado has one of the most difficult, complex taxing systems for businesses of the 50 states,” he added. “This system will help them dramatically reduce that burden. One of the things we want to ensure is a hold-harmless provision.”
That means that if the database, which is overseen by the Colorado Department of Revenue, contains the wrong tax rate for any area of the state, a business that uses that rate won’t be subject to fines or fees for remitting the wrong sales tax. Businesses that opt to use a third-party vendor to determine those rates instead also would be held harmless for errors, but only if their information comes from the state database.
This all stems from a controversial decision by the state in 2016 to require businesses to assess sales taxes based on where their goods are being shipped, rather than where they are sold. That change didn’t alter in-store sales.
That requirement had the state’s business community up in arms, complaining that it was far too onerous to expect them to know what sales tax rates were being assessed in other parts of the state or nation.
The bill requires a final House vote before it can move to the Colorado Senate, which could happen as early as today.