December 2018: Colorado Collection Updates

As of December 1, 2018, Colorado has new guidelines for the way remote sellers should collect tax in their state.  

  • We break down these changes and next steps for remote sellers in full detail here on our blog.
  • Here's a quick overview: As of December 1, 2018, all sellers with nexus in Colorado (physical, economic, or otherwise) are required to have a Sales Tax account and collect sales tax on ALL taxable sales.
  • Retailer's Use Tax accounts will only be applicable to sellers who do not have nexus in Colorado (physical, economic, or otherwise) who wish to collect and remit tax in this state despite having no obligation to do so.

How do these changes affect my TaxJar Reports?

  • TaxJar's SmartCalcs API was updated to reflect the new collection method on 1/1/19 and if you use SmartCalcs for your sales tax calculations (either you use our API directly or you use our WooCommerce plugin, Magento extension, Stripe Integration, Ecwid integration which are powered by SmartCalcs or a 3rd party integration that is powered by SmartCalcs), you are now able to collect accurately based on the state's new guidelines.
  • These changes will also require updates to the Colorado Reports in your TaxJar account, and these changes should be released in February 2019 for Reports for sales on January 1, 2019 and later.
  • The state has a grace period to give sellers time to comply with these changes. 
  • The grace period is in effect now and will end on May 31, 2019. During this time, Colorado is automatically giving sellers a waiver from compliance with the destination based collection changes.  
  • You can learn more about this grace period here at the state's website.

What does this mean for your TaxJar Reports for sales prior to January 1, 2019?

  • Your 2018 Colorado Reports will remain the same and they will not change.
  • Your 2019 Colorado Reports (for sales 1/1/19 and later) will also remain the same until our Reporting update is released in February 2019.
  • If you have entered in a Colorado address in your TaxJar account's Business Profile or State Settings, you'll see a Colorado Report based on the assumption that you have a Sales Tax permit.
  • If you are a remote seller (you do not have a Colorado address in your TaxJar account's Business Profile or State Settings), you'll see a Colorado Report based on the assumption that you have a Retailer's Use Tax account with the state in your Colorado Reports for the following frequencies: Annual 2018, Q4 2018, and December 2018.

Please Note: If you are a remote seller and you begin collecting Destination based rates before the update of Reports on January 1st, your Annual 2018, Q4 2018, or December 2018 Reports for Colorado will not reflect the Destination rates. Although the Destination based tax rate is higher, our system's sourcing will not recognize the tax collection as Destination rates, and the tax you collect before 1/1/19 will be listed as Use Tax. In this scenario, you would collect more than the Report will display and the Report will not itemize over-collected amounts.

  • For this reason, we recommend that you do not begin collecting Destination rates until our Colorado Report update goes into effect on January 1, 2019. 

Once the changes to the Report are released in February 2019, all 2018 Reports for Colorado will remain the same. 

  • The updates that take effect in February 2019 will not be retroactively applied to Colorado Reports for 2018.
  • Because of the state's grace period to correct your sales tax account type, you will still be able to file a blend of Sales Tax and Retailer's Use Tax returns in January 2019 for 2018 sales.

What does this mean for your TaxJar Reports for filing periods after January 1, 2019?

  • Your Colorado Reports for January 2019 and later will display a Sales Tax section, but will not display a Retailer's Use Tax section.

What does this mean for Colorado SmartCalcs calculations after January 1, 2019?

  • If you use SmartCalcs to calculate your sales tax rates for Colorado (either you use our API directly or you use our WooCommerce plugin, Magento extension, Stripe Integration, Ecwid integration which are powered by SmartCalcs or a 3rd party integration that is powered by SmartCalcs), the API will update to destination based sales tax rates on January 1 to match the state's new rules.

How does this affect SmartCalcs calculations for Home Rule Cities after January 1, 2019?

  • If you use SmartCalcs and you have a Colorado address in your TaxJar account's Business Profile or State Settings that is located in one of the home rule cities, state sales tax and state-collected local and special district sales tax as well as applicable state-administered local and special district taxes will be applied to sales that occur in that city.
  • If you use SmartCalcs and you do not have a Colorado address in your TaxJar account's Business Profile or State Settings that is located in one of the home rule cities, state sales tax and state-collected local and special district sales tax as well as applicable state-administered local and special district taxes will be applied to sales that occur in the Home Rule cities, but local sales tax rates that are administered by the Home Rule city itself will not be calculated on sales that occur in those cities.
  • As we mention here, if you are enrolled in TaxJar's AutoFile for Colorado, our system will submit your Sales Tax Return for state administered cities, counties and districts for sales made 1/1/19 and later. If you need to file returns for Home Rule cities, you will be responsible for submitting those returns and payments separately.

How does this affect AutoFile for Colorado?

  • If you are a remote seller enrolled in AutoFile and have returns due for sales prior to 12/31/18, our system will be able to support filing a Retailer's Use Tax return for your final 2018 return.
  • If you are a remote seller enrolled in AutoFile and have returns due for sales after 12/31/18, you will be required to set up a Sales Tax account and cancel your Retailer's Use account in order to use AutoFile for Colorado for sales after 1/1/19. 
  • Retailer's Use Tax returns will not be supported with Colorado AutoFile for sales after 1/1/19.