The Colorado Sales and Use Tax Simplification Task Force has advanced a bipartisan bill that would prevent vendors from being penalized for errors made as a result of using the new state GIS database designed to help them navigate the state’s complex tax system.
A U.S. Supreme Court decision in 2018, South Dakota v. Wayfair, opened up the possibility that states can require businesses without a physical presence in the state to collect and remit sales taxes on transactions within the state.
“For 30 years, Colorado’s complex system of tax jurisdictions, home rule municipalities and TABOR have led to challenges for businesses trying to navigate different rates,” Task Force Chair Rep. Tracy Kraft-Tharp (D-Arvada) said.
“The Wayfair decision made the situation more complex, and our task force has been working hard since 2017 to address these concerns,” Kraft-Tharp said. “Last session we tasked the state with creating a GIS database and software system to make the tax remittance process easy for businesses.
“Today, we continued this work by advancing legislation to protect vendors from being liable for any errors made as a result of using the GIS database or third-party software applications that rely on the underlying GIS data.”
With local jurisdictions imposing different tax rates, vendors face a challenge in determining the correct tax amount and accurately remitting payments to the proper local tax jurisdictions.
Large retailers and market facilitators, such as Amazon, must remit the state’s 2.9 percent sales tax and local taxes based on the location of the purchaser.
Last session, lawmakers passed HB19-006, which required the state to create a Geographic Information System (GIS) database and software to assist vendors in remitting sales and use taxes to local jurisdictions.
The new system will help businesses navigate the patchwork of sales and use taxes across the state and accurately remit sales taxes. Businesses also can use third-party software to help them determine tax rates in jurisdictions across the country.
One of two bills advanced by the task force on Oct. 24 would hold vendors harmless for errors made as a result using the new state GIS database or third-party software that relies on the GIS database, once the state develops and releases the new database and software.
Additionally, the Department of Revenue must ensure that the information provided in the state database is 95 percent accurate.
The other bill would extend the task force until July 2025 and eliminate the requirement for a Department of Regulatory Affairs sunset review process. The bill expands the scope of the task force’s work to include a review of legislation passed last session.
The task force was created by legislators in 2017 to study the state’s complex tax framework, including taxes charged by local jurisdictions, and to identify opportunities to adopt innovative revenue-neutral solutions that do not require constitutional amendments or voter approval.