In 2013, the Council on State Taxation rated Colorado as the fourth worst state in the country with a grade of “D” thanks to a patchwork of 756 specific geographic areas with different sales tax rates and bases. It’s hard to imagine the situation getting worse but thanks to recent court rulings, the threat to small business is looming.
I’m proud to serve on the Legislative Simplification Sales and Use Tax Task Force, a group of lawmakers dedicated simplifying Colorado’s sales tax. Working with the task force and small business to development a legislative path to a better tax climate is critical to the ongoing strength and success of our economy.
Colorado’s small businesses are the backbone of our economic engine. They employ half of the state’s workforce and make up more than 97 percent of all Colorado private companies.
But following a recent court decision, the Colorado Department of Revenue (CDOR) issued a new rule that promises to strangle business owners with yards of red tape by mandating sales tax collections based on a customer’s address, rather than the point of sale. This leaves business owners with the burden of untangling hundreds of different tax rates in multiple, overlapping jurisdictions, drowning them in piles of paperwork.
The revenue department announced it would delay enforcement of the rules until the end of May so the state Legislature could weigh in.
My colleague in the Senate, Sen. Angela Williams (D-Denver) is carrying a new bipartisan bill, which I have co-sponsored that seeks to free business owners from this regulatory stranglehold by authorizing the state to find a software partner that can build a one-stop sales tax collection portal. This would simplify the process for businesses, which could access the portal to quickly determine point-of-delivery sales taxes.
Without this new system, Colorado’s economy is at risk as scores of businesses expect to be crippled or wiped out by the time and expense necessary to comply with the new rules.
For example, before the new rules if an IT company in Durango sold a computer to a Sheridan resident, the company simply collected state and special district taxes. Now, the company must collect the Sheridan city sales tax of 3.5 percent and the Arapahoe County sales tax of 0.25 percent. In addition, the business will be required to purchase a Sheridan sales tax license ($65) and file a sales tax return directly with the City of Sheridan. And this is only one sale. Under the new rules, the company will have to do this for every area of the state it makes a sale.
Simplifying the sales tax process to protect small businesses and our economy is not only a common-sense solution, but fiscally responsible and an absolute necessity. SB-006 has passed the Senate with strong bipartisan support and is on the way to the House. I urge my colleagues in the House to join me and thousands of small businesses to support this important legislation.
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