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Ask any Colorado small business owner and they’ll likely agree Colorado has one of the most complicated sales tax systems in the nation. Just a few short years ago, Colorado received a “D” rating from the Council on State Taxation, ranking Colorado’s sales tax system as one of the worst in the country. The abysmal rankings are a result of a confusing and cumbersome patchwork of 756 geographic areas with different sales tax rates and bases, and 72 home rule cities that require businesses to individually register and remit sales tax. This complicated and challenging sales tax system puts a significant burden on businesses around the state.
Working hand-in-hand with the General Assembly’s Sales and Use Tax Simplification Task Force, the Coalition to Simplify Colorado Sales Tax was founded in 2015 by a non-partisan and diverse group of business and community leaders to address these challenges with one mission in mind: simplify Colorado’s sales tax system.
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The tireless efforts of the task force and coalition have not gone unnoticed by small business owners like me. Gov. Jared Polis signed five new bills into law this past legislative session that all seek to simplify our state’s sales tax system by improving access to and efficiency of the sales and use tax system (SUTS), a database that helps business owners untangle the more than 700 sales tax jurisdictions.
Sponsored by state Sens. Jeff Bridges and Kevin Van Winkle and Reps. Cathy Kipp and Rick Taggart — all 2024 legislation that passed brings unique benefits to small businesses because they…
Create more certainty
Senate Bill 23 requires local taxing jurisdictions hold harmless small businesses who may remit taxes to the wrong taxing districts because of erroneous address data in the SUTS and Geographic Information System (GIS). Small businesses have limited resources to research changes to the tax code, and this will create more certainty for those businesses that rely on the SUTS and GIS data, decrease filing complexity, help streamline and reduce administrative burdens and encourage more businesses to begin or continue to operate across multiple taxing jurisdictions.
Provide uniformity
Senate Bill 24 – It is critical for taxpayers to have consistency in reporting requirements related to Colorado’s sales and use tax system, including local lodging taxes imposed by local governments. This bill will provide uniformity and standardize reporting requirements across local taxing jurisdictions with the collection and remittance of local lodging taxes with other local taxes. This will help small businesses by making the requirements the same across the board. Simplifying reporting rules will help ensure the correct information is reported and make the process easier for everyone involved, including those who are collecting the money.
Revise, modernize and harmonize laws
Senate Bill 25 concerns local government sales and use taxes administered by the department of revenue (DOR), and revises, modernizes and harmonizes various state statues relating to the state-administration of local sales and use tax into one uniform statute. Among many, one of the greater benefits this bill provides to small businesses is its requirement of local governments that offer vendor fees – money returned to businesses to encourage them to remit taxes – to uniformly define those fees as percentages of their tax submissions, rather than set amounts of money that can make them harder to calculate.
Streamline processes
House Bill 1041 streamlines the processes of filing tax returns for businesses operating in multiple jurisdictions. This will help small businesses by reducing the volume and frequency of filing tax returns, including those for minimal amounts. This further encourages SUTS participation and makes it worth a business owner’s time to remit taxes to those jurisdictions.
Increase transparency
House Bill 1050increases transparency for local taxing jurisdictions that impose a lodging tax or sales or use tax on building or construction materials and creates a more competitive economic environment in Colorado that will attract employers. As a small business in the construction industry, calculating a barrage of different tax rates in various jurisdictions is very complicated and time consuming. This bill makes it so we can identify what the jurisdiction is charging up front in order to accurately calculate the rest of the tax amount owed.
In light of the efforts of the Task Force and Simplify Coalition to lead the charge on getting these and other bills passed, Colorado has climbed 18 spots — from 39th to 21st of states since 2017 — on the sales tax component in the Tax Foundation’s 2023 State Business Tax Climate Index.
Make no mistake, though, there is still much work to be done.
It will take collective action and support of our state’s small businesses to continue to make progress. The Simplify Coalition will remain supportive of the work of the Task Force to put Colorado businesses first and simplify our state’s sales tax system. This will result in a thriving business climate, more jobs and an economy that is flourishing. This is an ongoing challenge, but we have come a long way since Colorado received that less than passing grade from the Council on State Taxation.
Jim Welte is the operations manager for the Summit Brick Company, committee member of the General Assembly’s Sales and Use Tax Simplification Task Force and on the Board of Directors for the Coalition to Simplify Colorado Sales Tax.