Tax Bills in the 2019 Legislature
Updated: Mar 25, 2019
It goes without saying that the Department of Revenue's "nexus" regulation from the fall of 2018 sent earthquakes throughout the auto industry. This is perhaps the most consequential tax regulation of the past decade, in terms of compliance costs - not to mention compliance manhours. Yet, it has resulted in little additional clarity in the ongoing battle between the state Department of Revenue and self-collected home rule jurisdictions. Requirements from both of these entities plague dealers as they file monthly collection reports and attempt to stave off audits. CADA, and the Coalition to Simplify Colorado Sales Tax, have spent the last several legislatures trying to advocate for laws that would clarify the state's expectations of motor vehicle dealers and simplify the sales and use tax collection process. This year's legislature has introduced two rays of hope towards that goal.
SB19-006: Electronic Sales Tax and Use Tax Simplification System
This bill picks up where last year's left off. It takes the results of the Request for Information submitted by the companies who submitted them, and instructs the Department of Revenue to put out a Request for Proposals. RFPS are essentially bids to transform the state's tax collection system according to our essential pillars: 1) uniform tax licensing application; 2) a common point of remittance for collected taxes; and 3) common definitions between municipalities as to which items are taxable and which are not. With those bids in hand, the State can move forward by contracting the winner put their plans to work.
This bill has passed the Senate. It then passed the House with a small amendment on March 22, 2019. It must stop briefly in the Senate for concurrence before moving to the Governor's desk for enactment. CADA and Simplify have both testified in support of this bill at each stage.
HB19-1240: Sales and Use Tax Administration
Following the Wayfair decision, the majority of states have been refining their laws in order to collect tax on out of state retailers. This bill clarifies how Colorado will evolve to Supreme Court's decision. It contains three main components. First, it will put into statute the nexus requirements from the Wayfair decision and codify an exemption for out of state retailers with de minimus sales. Second, it sources transactions in Colorado to be taxed at the location of the buyer - what is called "destination-based sourcing." This has long been the standard for sales of motor vehicles. Third, it defines a marketplace facilitator (i.e. Amazon, Etsy) and places the responsibility for tax collection on the facilitator rather than the vendor producing the item sold.
This bill will begin in the House Business Committee, with a hearing on March 26, 2019. CADA will testify in support of the legislation. We will update this post as the bill progresses.
You will note that neither of these bills deal with the chaos of taxation on motor vehicle leases. Many of these unanswerable questions come from the conflicts of law between the state and the counties. The state will not intercede (sometimes prohibited by Title 29 C.R.S.) in the county's ability to determine the manner and methods of its taxation. Thus, the industry remains at the behest of the county where it seeks to register vehicles on its customers behalves. The state Department of Revenue, to their credit, has distributed terse memos on the timing of taxation. However, many of our largest unanswered questions lie in the gray areas between law and practice. The state also does not acknowledge the verbal gymnastics involved with calling a use tax a sales tax for the purpose of wrongful collection, that I have labeled contrary to law.
We expect this conversation to continue into the coming Electronic Vehicle Registration implementation and seek to standardize our largest outlying issues through that process.
How dealers should best prepare for the oncoming implementation of the nexus rule will be the topic of another post. In the meantime, please contact Matthew Groves at firstname.lastname@example.org with questions.