Businesses Given Grace Period to Comply with New State Sales Tax Collection Rules

By Riley, Rachel | The Gazette (Colorado Springs, CO), December 7, 2018 | Go to article overview

Businesses Given Grace Period to Comply with New State Sales Tax Collection Rules


Riley, Rachel, The Gazette (Colorado Springs, CO)


Local businesses that ship throughout Colorado will have a few more months to comply with a change in sales tax regulations that retailers fear will be a costly blow.

The state Department of Revenue said Thursday that it will extend a “grace period” from March 31 to May 31 before it begins enforcing the new rules, which took effect Saturday in the midst of the holiday shopping season.

The regulations, announced in September, require retailers to charge the sales tax rate of the jurisdiction where a product is delivered. Previously, if a Colorado Springs business shipped an item to another area of the state where the business did not have a physical location, it would charge the state 2.9 percent sales tax, as well as any special district taxes levied at the shipment’s destination, which are also collected by the state.

“We have heard from legislators and the business community, and the Department of Revenue agrees it is important for the state to take the time to get this right,” the department’s executive director, Mike Hartman, said in a statement. ”This additional time will give the state Legislature an opportunity to find innovative solutions to streamline and simplify our sales tax collection laws in accordance with the wishes of the residents of Colorado.”

Officials who objected to the rule change said the delay will give the state more time to work with local businesses on the change.

”We’re really pleased that the Department of Revenue listened to the concerns of the businesses and is adding additional time for us to figure out how to make this work,” said Rachel Beck, vice president of government affairs for the Colorado Springs Chamber & EDC, which has heard from dozens of businesses worried about the new rules.

Even with the extra time, concerns remain for businesses, which will likely need to invest in new databases to calculate specific sales tax rates and pay for additional bookkeeping to maintain compliance.

Many of the databases that retailers use to calculate sales tax rates aren’t equipped for the new regulations, said Kara Longmire, an executive at a company that sells point-of-sale software to about 50 Colorado rental businesses.

Such databases often provide sales tax rates by ZIP code, but because one ZIP code might contain multiple taxing jurisdictions, businesses now must know the exact tax rate of the address they are shipping to, said Longmire, co-president and CEO of Colorado Springs-based Alert Management Systems.

“It’s going to be really difficult to try and figure that out,” she said Wednesday. “The reporting is going to be an absolute disaster. …

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