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Retailers: New Use Tax Reporting Requirements in Colorado May Soon be Enforced


11/20/13

Synopsis:

Taxpayers should be aware that Colorado's controversial use tax reporting requirements, which have been the subject of extensive litigation, may soon be enforced.

Issue:

In March 2010, Colorado enacted new use tax reporting requirements for retailers selling products to customers in Colorado and not collecting sales tax. The new rules apply to retailers that are not subject to the Colorado sales tax provisions and who received $100,000 or more in total gross sales from Colorado customers in the prior year or expect to receive $100,000 or more in total gross sales from Colorado customers in the current year. These “non-collecting retailers” are required to provide the following information:

  • Transactional Notice: Colorado customers must be notified that use tax is due on certain purchases from the retailers and that the customers are required to file a use tax return.
  • Annual Purchase Summary: A year-end summary of information must be provided to Colorado customers making purchases of more than $500. The annual purchase summary must include the total amount paid to the retailer by the customer, purchase dates, and categories and amounts of the various purchases.
  • Customer Information Reporting: Retailers must file an annual statement with the Colorado Department of Revenue detailing the total amount paid for Colorado purchases from each individual customer, regardless of purchase amounts, by March 1 following the close of the calendar year.
     

These reporting requirements were challenged in federal court in 2010. In January 2011, the U.S. District Court granted a preliminary injunction against the enforcement of these rules and in March 2012, the injunction became permanent. However, a federal appeals court dissolved this injunction in August 2013, finding that the federal court lacked the jurisdiction to hear the challenge.

While it is expected that a suit will be filed in Colorado state court to again challenge the “non-collecting retailer” reporting requirements, at the present time, the Department of Revenue is no longer prevented from enforcing such provisions.

What Does CohnReznick Think?
The Colorado Department of Revenue has been released from its restriction but has not announced when enforcement will begin. It is also unknown if a challenge in state court or an appeal to the United States Supreme Court will be successful. Therefore, clients should be aware of the rules and prepare to comply with use tax notifications, annual returns, and statements. CohnReznick will issue an additional alert once further guidance becomes available.


Contact:

For more information, please contact one of the following CohnReznick tax professionals:

To learn more about CohnReznick’s State and Local Tax Practice, please visit our webpage.


Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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