Update 7.5.17: The Colorado Department of Revenue has posted new information about use tax and Colorado's new notice and reporting requirements for non-collecting vendors. Colorado created a use tax notification requirement in 2010 to facilitate enforcement of its consumer use tax, which is owed to the state when sales tax wasn’t collected at the point of sale. The policy was immediately challenged by the Direct Marketing Association (DMA) and has been under dispute ever since, with both the state and the DMA intent on pursuing every recourse to defend their positions. Now the case has been settled, and the reporting requirement will take effect July 1, 2017.

Use tax notification requirement explained

The use tax notification policy requires noncollecting out-of-state vendors that made at least $100,000 in total gross sales during the previous calendar year (and expect to do the same during the current calendar year) to inform Colorado customers that their purchases may be subject to Colorado use tax. Additionally, retailers must send to customers who purchased more than $500 worth of taxable goods in one year an “annual purchase summary” listing purchase dates and amounts, along with a reminder that Colorado consumers are obligated to remit use tax on all untaxed, nonexempt purchases. Noncollecting vendors must also send the Colorado Department of Revenue an annual customer information report, listing the names, addresses, and total purchases of their Colorado customers.

Legal dispute recap

Enforcing Colorado’s use tax reporting requirement

The ongoing legal disputes have prevented enforcement of the use tax notification policy for nearly seven years. They’ve also created uncertainty for noncollecting retailers doing business in Colorado. Now that the Supreme Court has refused the requests made by the DMA and the Colorado Department of Revenue, it is time for both parties to settle and move on. The DMA is well situated to make a fresh start, having changed its name to the Data & Marketing Association (still DMA) last fall. The Department finds “reasonable cause for non-compliance with the Act and Regulations,” and it won’t require noncollecting retailers to comply with them until July 1, 2017. All penalties imposed on retailers for noncompliance prior to July 1 will be waived. Beginning July 1, 2017, “the Act and Regulations shall be fully implemented and enforced.” Noncollecting retailers must file their first Customer Information Reports with the Department of Revenue by March 1, 2018. Additional details are available in the Settlement Agreement.