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A Snapshot of Colorado Sales Taxes – to Open This Discussion

author photo of Keith Crichton

Colorado currently has a state sales tax of 2.9 percent and 51 county sales taxes, 153 city sales taxes and a number of transportation, lodging and other special districts that are collected by the state. In addition, 71 home rule cities collect their own sales taxes with separate sales tax returns.

The state-collected counties and cities also have use taxes which are the same rates as the sales taxes, but by statute they are only permitted to levy the use taxes on the “use, storage or consumption” of motor vehicles and building materials. As a result of this limitation, the state seems to be slowly moving toward a more restrictive definition of nexus for the state-collected cities (or “statutory” cities as they are commonly called) in order to force businesses to collect sales taxes, which cover far more types of tangible personal property than do the use taxes.

Currently the regulations require a business to collect sales taxes only if the business sells, leases or delivers tangible personal property to a buyer in a statutory city, and maintains an office, salesroom or similar place of business in the city. The second half of the test is also met by having employees present in the city for more than a temporary or infrequent period of time. However the interpretation of this second half appears to be changing so that any presence of an employee in a statutory city will create nexus and a tax collection obligation. Historically that has been the position taken by the home rule cities.

If you have any questions, comments or suggestions of topics for future entries in this Colorado Sales Tax column, I invite you to enter them in the "Comments" box below.

Keith Crichton, CPA is President of Crichton Consulting Services, LLC a specialty CPA firm located in Centennial, Colorado, a suburb of Denver. For the last 30 years he has been responsible for the corporate income/franchise, sales and use, property and other tax filings for all 50 states. He has been the tax manager of several multistate companies, including several equipment leasing companies and an international accounting and tax consulting company.

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8 Responses to A Snapshot of Colorado Sales Taxes – to Open This Discussion

  • Posted by Brad on August 1, 2016 1:41pm:

    We are a for profit school, we have a Learning Resource Center (LRC) for students, in this part of the campus we sell prepackaged foods to students, should we be collecting sales tax on these purchases? Occasionally, we sell a tshirt or pencils as well, does this require sales charges as well? Thank you, Brad

  • Posted by Melodee on February 5, 2016 10:35am:

    We moved to Summit County, CO in October, 2015 from California. For 30 years in California, my husband had a DBA. His clients are all in Mexico & Central America. He sells them hydraulic cylinders, parts, machinery, etc. In California he had a local business license, etc., and a CA resale permit. As long as he reported sales quarterly online to CA tax authority and maintained strict documentary proof from his customs agents in CA and TX, that every item he purchased was exported, he was exempt from CA taxes. Now, in Colorado, he established an LLC (reg. document online with CO Sect'y of State, obtained Fed. EIN # & local business license.) But now we're "stuck" knowing how to proceed relative to CO tax wholesaler's resale permit. None of the items will every pass through Colorado, as they are sourced and sent to customs brokers in CA and TX still. Can you help me to know how to help him? Thank you!

    • Posted by Author photo of Keith Crichtonkeithcrichton on February 9, 2016 3:14pm:

      I confirmed with the state that as long as your products are not coming into Colorado, and you are not making sales to Colorado residents, you don't need a Colorado sales tax license. So you should be OK as long as those things don't change. I would suggest that you continue to get and keep the same proof from the customs agents as in the past. The thing that distinguishes Colorado from California is that his products were going into California and being shipped from there. That's not the case here.

      • Posted by Melodee on February 9, 2016 3:50pm:

        Thank you so much for your clear answer. I appreciate it that you took the time to check with the state.

  • Posted by Sandy on May 13, 2015 11:05am:

    We are located in upstate NY and we recently purchased a Denver payroll company. The payroll software is cloud based and our customers use it through the cloud. Some of our customers are in Colorado and others are in other states. We do have a physical presence in Denver. Should we be charging use tax on the use of the system? If so should it be just to the customers in Colorado?
    Help

    • Posted by Author photo of Keith CrichtonKeith Crichton, CPA on May 21, 2015 11:47am:

      Sandy,the state of Colorado does not tax most personal services, including payroll services, whether or not they are cloud based. However the City and County of Denver does tax "Data Processing" on the retail sale of Data Processing Programs. Whether you would need to collect Denver sales taxes depends on the location of the server upon which the payroll software resides and whether your Colorado customers are located in Denver. You would not need to collect taxes for customers outside Colorado unless the payroll company has nexus anywhere outside Colorado. I don't immediately know how NY taxes cloud services, but could get the answer if you wish. Feel free to give me a call at 303-618-8993 or send me an email at keith@crichtoncs.com if you want to discuss Denver or NY further.

  • Posted by Mark on March 8, 2015 3:51pm:

    HI, I have a CO C-Corp that is looking to accept online sales for a company in the Bahamas. I will pay them for the product and they will drop ship their product to US addresses. Can you tell me if I have to collect sales tax for these purchases and if so, how to find the correct percentage?
    Thanks!
    M

    • Posted by Author photo of Keith CrichtonKeith Crichton, CPA on May 21, 2015 11:19am:

      Mark, I am not an expert in drop shipments. I would suggest that you take a look at Diane Yetter's Q&A page about drop shipments at http://www.salestaxsupport.com/sales-tax-information/sales-tax-help-questions/drop-ship/. For sales going to customers in Colorado you would need to collect at least Colorado state 2.9% tax. If the customer is also within the same county, city, transit and/or other districts as your C-Corp, then you will need to collect those taxes as well.

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