Employee Who Indirectly Supports Internet Sales Creates Nexus in Colorado

Colorado has issued a private letter ruling determining if sales tax nexus is established for an online wine retailer by a Colorado-based employee who supports internet sales indirectly. The employee’s job is to identify wine cellars in Colorado to be acquired by the company. The employee is not a sales representative and doesn’t promote the company’s sales. Once a wine cellar has been identified for purchase, a team of company’s employees visits Colorado to inspect and potentially purchase the wine. Sales tax nexus is established in Colorado for the wine retailer for two reasons. While not directly soliciting or promoting the company’s sales, the first employee is performing work in Colorado in connection with the company’s sales of tangible personal property in the state. In the ruling, the Department of Revenue noted that nexus does not require that the activity creating nexus relate to the taxable transaction at issue. Second, the team of employees who visit Colorado to inspect and purchase wine creates sales tax nexus for the company in Colorado. As a result, the company must collect Colorado sales tax on wine sales that are delivered to a buyer located in Colorado. (PLR 14-005, Colorado Department of Revenue, July 28, 2014, released December 2014)

Posted on December 29, 2014