Payment of Sales Tax by Marketplace Provider Relieved Third-Party Sellers in Colorado

The Colorado Department of Revenue has released a general information letter stating that a marketplace provider’s payment of sales tax on sales by third-party retailers relieves the obligation of the third-party retailers to collect and remit sales tax (note that general information letters are general discussions of tax law and are not binding on the Department). In this instance, the marketplace provider represented that it is an agent of the third-party sellers for the purpose of selling their goods. The marketplace provider also represented that, if it collects and remits sales tax on sales subject to tax in Colorado, it does so as a “jointly responsible” retailer. The Department determined that the payment of the correct amount of sales tax by one jointly responsible retailer discharges the payment obligation of the other jointly responsible retailer. However, this does not discharge or otherwise limit the Department’s authority to administer and collect taxes from either jointly responsible retailer if a deficiency occurs in the future. The Department further added that if the marketplace provider exercises reasonable diligence when accepting the exemption certificate or sales tax license, then both the marketplace provider and third-party seller are relieved of liability for collecting tax if the Department later determines that the exemption did not apply. (Colo. Gen. Info. Letter No. GIL-16-020 (Colo. Dep’t Revenue Oct. 4, 2016, released Dec. 7, 2016))

Posted on February 14, 2017