The Direct Marketing Association has reached a settlement agreement with the Colorado Department Revenue in regards to its lawsuit over the state’s use tax notice and reporting requirements. Pursuant to the settlement agreement, the use tax notice and reporting requirements legislation becomes effective on July 1, 2017. Per the agreement, the Department of Revenue will waive penalties for non-collecting retailers who fail to comply with the legislation prior to July 1, 2017. Non-Collecting Retailers will be required to include the required transactional notices on all invoices issued after July 1, 2017 per Sec 39-21-112(3.5)(c)(I) and 1 Colo Code Regs Section 201-1: 39-21-112.3.5(2).
The first annual summaries of customer purchases required of non-collecting retailers must be mailed to customers by January 31, 2018. The Department will waive all penalties for non-collecting retailers who do not include customer purchases made prior to July 1, 2017 in any annual summary provided to Colorado customers before the January 31, 2018 deadline. This summary must include all transactions dated after July 1, 2017 and if possible all 2017 transactions.
The first customer information reports required of non-collecting retailers must be filed with the Department by March 1, 2018. The Department will waive all penalties for non-collecting retailers who do not include customer purchases occurring prior to July 1, 2017 in their customer information report provided to the Department on or before the March 1, 2018 deadline.This information report must include all transactions dated after July 1, 2017 and if possible all 2017 transactions.
To view our previous news item on this case, click here.
Based on this settlement, all Colorado non-collecting retailers should review their marketing materials, invoices and systems to ensure they will be able to comply. Penalties for non-compliance are harsh.
(Direct Marketing. Association v. Colorado Department of Revenue, Colo. Dist. Ct., No. 13-CV-34855, settlement announced 2/23/17)
Note that a “non-collecting retailer” does not include a retailer whose sales in Colorado are de minimis. For purposes of this regulation, the Department will presume that a retailer that makes less than $100,000 in total gross sales in Colorado in the prior calendar year and reasonably expects total gross sales in Colorado in the current calendar year will be less than $100,000 is a retailer whose sales in Colorado are de minimis.
Penalties apply for failure to comply with the requirements. The non-collecting retailer shall pay a penalty of $5 for each sale to a Colorado purchaser with respect to which the required notice does not appear. The non-collecting retailer shall pay a penalty of $10 for each notice that is not sent by the non-collecting retailer to the Colorado purchaser.
UPDATE: The Colorado Department of Revenue has issued helpful information regarding the notice and reporting requirements obligations for remote sellers created under this legislation. For more information, visit the Colorado Department of Revenue webpage.
UPDATE: The Colorado Department of Revenue has issued a document with instructions for remote sellers that are obligated to submit customer reports to the state. The document – which can be viewed here – contains specific instructions on how to submit Annual Customer Information Reports to the Department of Revenue. The document also details the formatting that should be used for the Annual Customer Information Report. The document also contains answers to frequently asked questions regarding the Annual Customer Information Reports. As a reminder, non-collecting retailers must file an Annual Customer Information Report with the Department by March 1 of the year following when the qualifying purchases were made. The first reports must be filed by March 1, 2018. (Use Tax Reporting Instructions, Format & FAQ for Non-collecting Retailers, Colorado Department of Revenue, 1/18)
For an update on this news item, click here.