Sales Tax Simplification Bill Advances

(Nov. 1) – The State of Colorado took a giant step today toward streamlining a system of calculating and collecting sales taxes that is so convoluted that it has been identified as inhibiting economic growth.

A draft bill approved this afternoon with unanimous bipartisan support in the Sales and Use Tax Simplification Task Force would require the state Department of Revenue to request proposals for a simplified electronic system for assessing and remitting sales and use taxes in Colorado.

“After years of impasse we have begun to move forward on a simpler, fairer and more predictable system that will save time, money and headaches for businesses all across Colorado,” said Rep. Tracy Kraft-Tharp, D-Arvada, the chairwoman of the task force.

Companies that do business in other states routinely say Colorado is the worst in the nation for the complexity of its sales tax laws. In Colorado, the same product is subject to myriad different local sales tax rates, depending on the home address of the purchaser. Witnesses testified that computation of local sales taxes across the state is so time- and labor-intensive that many smaller companies try to ignore the law or shun statewide sales efforts, stunting their growth potential.

If the bill is approved by the Legislative Council and the full legislature during the 2018 session, the new system would be required to provide:

  • Accurate address location information so that every buyer and seller knows what sales tax jurisdictions apply to each transaction
  • A single application process for sales tax licenses, ending the current situation in which every merchant who collects sales taxes is required to apply for separate licenses from every jurisdiction to which the merchant remits sales taxes
  • A single sales tax remittance form, ending the headache of merchants having to wrestle with multiple forms
  • A single point of remittance for sales and use taxes, making it no longer necessary for a merchant to cut different checks for every taxing jurisdiction
  • A taxability matrix of each item subject to sales and use taxes, so seller and buyer have an accurate idea of what the sales tax will be for any particular transaction

Rep. Kraft-Tharp was the prime sponsor of HB17-1216, also sponsored by Rep. Lang Sias, R-Arvada, which stood up the task force to study and report on ways to streamline local sales tax rates and collection processes across Colorado.

“We envision this as at least a three-year process, but I’m very pleased with the progress we’ve made so far,” said Rep. Kraft-Tharp, who is also chairwoman of the House Business Affairs & Labor Committee.

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