Colo. Code Regs. 39-21-112(3.5)

Current through Register Vol. 47, No. 19, October 10, 2024

Rule 39-21-112(3.5) - Notice and Reporting Requirements for Non-Collecting Retailers

Basis and Purpose. The bases for this rule are § 39-21-112(1) and § 39-21-112(3.5), C.R.S. The purpose of this rule is to clarify how a retailer that does not collect Colorado sales tax shall comply with notice and reporting requirements of § 39-21-112(3.5), C.R.S.

(1)General Rule. Every Non-Collecting Retailer shall:

(a) Provide a Transactional Notice to all Colorado Purchasers as described in paragraph (4) of this rule;

(b) Provide an Annual Purchase Summary to all Colorado Purchasers by January 31 of each year as described in paragraph (5) of this rule; and

(c) Provide an Annual Customer Information Report to the Department by March 1 of each year as described in paragraph (6) of this rule.

(2)Definitions.

(a)"Annual Customer Information Report" means the annual report required to be sent by a Non-Collecting Retailer notifying the Department of the information required pursuant to paragraph (6) of this rule.

(b)"Annual Purchase Summary" means the notification required to be sent by a Non-Collecting Retailer notifying Colorado Purchasers of the information required pursuant to paragraph (5) of this rule.

(c)"Colorado Purchaser" means a purchaser who makes a Colorado Reportable Purchase. If tangible personal property is purchased by one party, who may be inside or outside of Colorado, and is shipped to another party in Colorado, the Colorado Purchaser is the purchaser of the tangible personal property, not the recipient of the tangible personal property.

(d)"Colorado Reportable Purchase" means:

(i) With respect to sales of tangible personal property that are shipped, a purchase that is shipped to an address in Colorado, or

(ii) With respect to sales of tangible personal property that are downloaded or otherwise delivered electronically, a purchase that the Non-Collecting Retailer, using a commercially reasonable method, determines is to be downloaded or otherwise used by a person located in Colorado. A commercially reasonable method may be based on the Non-Collecting Retailer's existing billing, customer-tracking, or other systems. The commercially reasonable method used by a Non-Collecting Retailer must be the same for each purchaser. Unless good cause exists to use a different method, the Non-Collecting Retailer must also use the same commercially reasonable method every year the Non-Collecting Retailer makes sales and must use such method for all states into which the Non-Collecting Retailer ships tangible personal property.

(iii) A Colorado Reportable Purchase does not include a purchase on which sales tax was collected at the time of the sale. This is true whether the sale was made by the Non-Collecting Retailer or a third-party and whether the collection was made voluntarily or was required.

(iv) A Colorado Reportable Purchase does not include a purchase of tangible personal property that is exempt from Colorado sales and use tax, the sale of a service that is separable and separately stated from the sale of tangible personal property, or shipping charges or other fees that are separable and separately stated from the sale of the tangible personal property.

(v) To the extent that disclosure of the purchaser's purchase or rental of video tapes, DVDs, Blu-Ray disks, or other video materials would violate 18 U.S.C. 2710A, the Colorado Reportable Purchase shall not include such purchases or rentals.

(e)"Department" means the Colorado Department of Revenue.

(f)"Non-Collecting Retailer" means a retailer that sells tangible personal property to Colorado Purchasers and does not collect Colorado sales or use tax. All corporations included in a controlled group of corporations pursuant to 26 U.S.C. 1563 shall be considered to be a single Non-Collecting Retailer for purposes of this rule. A retailer that collects Colorado sales or use tax is not a Non-Collecting Retailer, regardless of whether the retailer is obligated to collect the tax or voluntarily collects the tax.

(g)"Total Gross Sales" means the total sales of Colorado Reportable Purchases made by a Non-Collecting Retailer. If the Non-Collecting Retailer makes exempt sales of tangible personal property, such sales may be excluded from the Total Gross Sales calculation; however the Non-Collecting Retailer is not obligated to exclude such sales.

(h) "Transactional Notice" means the notice required to be provided by a Non-Collecting Retailer to a Colorado Purchaser at the time a Colorado Reportable Purchase is made notifying the Colorado Purchaser of the information required pursuant to paragraph (4) of this rule.

(3) [Expired 05/15/2018 per House Bill 18-1253]

(4)Transactional Notices. A Non-Collecting Retailer shall provide a Transactional Notice with every Colorado Reportable Purchase not exempt from Colorado sales and use tax.

(a)Online Purchases. For all purchases made online, a Transactional Notice shall be prominently located in close proximity to the "Tax" or "Sales Tax" line at checkout, or if no "Tax" line is available, in close proximity to the "Total Price" line shown at checkout.

(i) If it is impracticable for the Non-Collecting Retailer to display the Transactional Notice as described above, the Non-Collecting Retailer shall prominently display a hyperlink as prescribed in this paragraph (4)(a)(i). The hyperlink shall read "See here for information about the state tax you may owe" or use similar language. The hyperlink shall direct to the principal Transactional Notice. The hyperlink shall appear in close proximity to the "Tax" or "Total Price" line shown:

(A) at checkout

(B) on the invoice or order confirmation; or

(C) on the webpage for the product purchased.

(ii) The use of online marketplaces to make sales does not relieve a Non-Collecting Retailer from the obligation to provide a Transactional Notice with each Colorado Reportable Purchase. However, a marketplace may provide the Transactional Notice to Colorado Purchasers on behalf of the Non-Collecting Retailer.

(b)All Other Purchases Not Made Online. For all other purchases not made online, a Transactional Notice must be prominently located on any order form or advertisement in close proximity to the "Total Price" line or explained orally to the Colorado Purchaser over the phone.

(i) If it is impracticable for the Non-Collecting Retailer to display the Transactional Notice as described above, the Non-Collecting Retailer shall state on the invoice or confirmatory communication near the "Tax" or "Total Price" line shown "See below/attached for information about the state tax you may owe" or similar language and provide the principal Transactional Notice either elsewhere on the invoice or confirmatory communication or in a supplemental document transmitted to the purchaser with the invoice or confirmatory communication.

(c) The Transactional Notice shall inform the purchaser that:

(i) The retailer does not collect Colorado sales or use tax;

(ii) The purchase is not exempt from Colorado sales or use tax merely because it is made over the Internet or by other remote means;

(iii) The State of Colorado requires purchasers to (A) report all purchases that are taxable in Colorado and for which no tax was collected by the retailer and (B) pay tax on those purchases.

(d) The Transactional Notice may inform the purchaser that:

(i) The retailer will provide to the purchaser an annual purchase summary of all purchases made by the purchaser during the previous calendar year in order to assist the purchaser in filing his or her tax return;

(ii) Details of how and when to file this return may be found at the Colorado Department of Revenue's website, www.colorado.gov/tax/usetax or successor URL;

(iii) The retailer is required by law to provide the Colorado Department of Revenue with an annual report indicating the name of the purchaser, the total dollar amount of all the purchaser's Colorado purchases made throughout the calendar year, and the purchaser's billing, notice, and shipping addresses. The retailer will not provide any other details of the transaction to the Department.

(e) With respect to any subscription or membership whereby the retailer ships products to a customer at regular intervals, without any additional action by the customer (commonly referred to as subscription boxes or " _______ of the month" clubs), a Transactional Notice is required only with respect to any transaction whereby the customer subscribes, enrolls or renews her or his subscription or membership. Separate Transactional Notices are not required for the subsequent, repeated shipment of products to the customer made automatically and without additional action by the customer.

(f) If the Non-Collecting Retailer is required to provide a similar transactional type notice for another state, in addition to Colorado, and the Non-Collecting Retailer provides a single transactional type notice to all purchasers, a notice will be sufficient if it contains substantially the same information as required in paragraph (4)(c) of this rule but is provided in a form that is generalized to any state.

(g)Penalties.

(i) The Non-Collecting Retailer shall pay a penalty of $5 for each sale to a Colorado Purchaser that does not provide the Transactional Notice.

(ii) If the Non-Collecting Retailer meets the criteria below, the penalty assessed against the Non-Collecting Retailer in a single year, pursuant to this section, shall not exceed the specified amounts:

(A) For a Non-Collecting Retailer that reasonably had no knowledge of the requirement to provide Transactional Notices and began to provide the required Transactional Notices within 60 days of demand by the Department, $25,000;

(B) For a Non-Collecting Retailer that sells only tangible personal property that is not taxable in Colorado or sells tangible personal property only to Colorado Purchasers that are not subject to sales or use tax, no penalty shall be collected.

(C) [Expired 05/15/2018 per House Bill 18-1253]

(iii) The Executive Director of the Department may waive all or any portion of a penalty for reasonable cause shown.

(5)Annual Purchase Summary.

(a) A Non-Collecting Retailer must send an Annual Purchase Summary to all Colorado Purchasers by January 31 of each year summarizing the Colorado Purchaser's Colorado Reportable Purchases for the prior calendar year. The notice shall meet the following requirements:

(i) Except as otherwise provided, the Annual Purchase Summary shall be sent by first class mail to the last known address of the Colorado Purchaser. The envelope containing the Annual Purchase Summary shall be prominently marked with the words "Important Tax Document Enclosed".

(A) The last known address shall be determined in the following order of preference:

(I) An address ("notice address") expressly provided by the Colorado Purchaser to the Non-Collecting Retailer for the purpose of receiving the Annual Purchase Summary, or, if not applicable,

(II) The Colorado Purchaser's billing address, or, if not known,

(III) The Colorado Purchaser's shipping address, or, if not known or applicable,

(IV) Any other physical address for the Colorado Purchaser that can be ascertained by the Non-Collecting Retailer using any commercially reasonable method based on the Non-Collecting Retailer's existing billing, customer-tracking, or other systems.

(V) If no physical address may be reasonably ascertained using any of the above methods, the Non-Collecting Retailer shall send the Annual Purchase Summary to the most recent email address the Non-Collecting Retailer has for the Colorado Purchaser.

(ii) The Annual Purchase Summary shall inform the purchaser that:

(A) the total amount paid by the Colorado Purchaser, including any taxable shipping charges or other taxable fees charged to the customer, during the prior calendar year. However, if a Non-Collecting Retailer is reasonably certain the charges and fees are not subject to tax in Colorado, such charges and fees may be excluded;

(B) a statement indicating that the State of Colorado requires the purchaser to file a sales or use tax return and pay tax on all taxable purchases for which no tax was collected by the retailer;

(C) a statement indicating that the retailer is required by law to provide the Colorado Department of Revenue with the purchaser's name, the total dollar amount of purchases made by the purchaser during the prior calendar year, and all of the purchaser's billing, notice, and shipping addresses, but no other information about the purchase(s) will be provided to the Department;

(D) if available, the dates of each Colorado Reportable Purchase;

(E) if available, the amounts of each Colorado Reportable Purchase, including any taxable shipping charges or other taxable fees charged to the customer. However, if a Non-Collecting Retailer is reasonably certain the charges and fees are not subject to tax in Colorado, such charges and fees may be excluded;

(F) if available, a description of the type of item(s) purchased (e.g., books, food, consumer electronics, household appliances); and

(G) if known by the retailer, whether the purchase is subject to or exempt from Colorado sales and use tax.

(iii) The Annual Purchase Summary may state that details of these requirements, including how to file, may be found at the Colorado Department of Revenue's website, www.colorado.gov/tax/usetax or successor URL.

(iv) If the net value of a Colorado Purchaser's return(s) and purchase(s) in a year are equal or result in a credit, then the Non-Collecting Retailer need not send an Annual Purchase Summary to the Colorado Purchaser.

(b) [Expired 05/15/2018 per House Bill 18-1253]

(c)Penalties.

(i) The Non-Collecting Retailer shall pay a penalty of $10 for each required Annual Purchase Summary that is not sent to a Colorado Purchaser.

(ii) If the Non-Collecting Retailer meets the criteria below, the penalty assessed against the Non-Collecting Retailer, pursuant to this section, shall not exceed the specified amounts:

(A) For a Non-Collecting Retailer that sent the Annual Purchase Summaries to all Colorado Purchasers within 30 days after the due date, $1,000;

(B) For a Non-Collecting Retailer that reasonably had no knowledge of the requirement and sent the Annual Purchase Summaries to all Colorado Purchasers within 60 days after demand by the Department to issue such Annual Purchase Summaries, $50,000;

(C) For a Non-Collecting Retailer that sells only tangible personal property that is not taxable in Colorado or sells tangible personal property only to Colorado Purchasers that are not subject to sales or use tax, no penalty shall be collected.

(D) [Expired 05/15/2018 per House Bill 18-1253]

(E) [Expired 05/15/2018 per House Bill 18-1253]

(iii) The Executive Director of the Department may waive all or any portion of the penalty for reasonable cause shown.

(6)Annual Customer Information Report.

(a) Any Non-Collecting Retailer who is required to provide at least one Annual Purchase Summary to a Colorado Purchaser must file an Annual Customer Information Report with the Department containing the following information:

(i) The name of each Colorado Purchaser;

(ii) The billing address, notice address, and shipping address of each Colorado Purchaser, if the information is known by the Non-Collecting Retailer;

(iii) The total dollar amount of Colorado Reportable Purchases, including taxable shipping charges or other taxable fees charged to the customer, made by the Non-Collecting Retailer to each Colorado Purchaser during the prior calendar year. However, if a Non-Collecting Retailer is certain the charges and fees are not subject to tax in Colorado, such charges and fees may be excluded. No other information about the purchase shall be provided.

(b) If the Colorado Purchaser provided more than one Colorado billing address, notice address, or shipping address, the Non-Collecting Retailer shall provide all such addresses to the Department.

(c) If the Non-Collecting Retailer made more than $100,000 worth of Total Gross Sales in Colorado during the prior calendar year, the Non-Collecting Retailer shall electronically send to the Department the Annual Customer Information Report. The Department shall publish on its website, by November 1st of each year, the required format and data elements of the Annual Customer Information Report and shall publish details on how the Annual Customer Information Report shall be transmitted to the Department.

(d) If a Non-Collecting Retailer is required to provide one or more Colorado Purchaser(s) with an Annual Purchase Summary, then the Non-Collecting Retailer must include all the Colorado Reportable Purchases made by all Colorado Purchasers in its Annual Customer Information Report, including any Colorado Reportable Purchases made by de minimis Colorado Purchasers.

(e) If the Non-Collecting Retailer is part of a controlled group of corporations pursuant to 26 U.S.C. 1563 and the group of corporations wishes to file the Annual Customer Information Report for all Non-Collecting Retailers within the group, any entity within such group of corporations may prepare and file the Annual Customer Information Report so long as such Annual Customer Information Report includes all Colorado Purchasers and all Colorado Reportable Purchases made from Non-Collecting Retailers within the group during the prior calendar year. However, a controlled group of corporations may choose for each individual Non-Collecting Retailer to file the Annual Customer Information Report separately.

(f)Penalties.

(i) If a Non-Collecting Retailer fails to file the Annual Customer Information Report or files an incomplete Annual Customer Information Report, the Non-Collecting Retailer shall pay a penalty equal to $10 for each Colorado Purchaser that should have been included in the Annual Customer Information Report, but was not included.

(ii) If the Non-Collecting Retailer meets the criteria below, the penalty assessed against the Non-Collecting Retailer, pursuant to this section, shall not exceed the specified amounts:

(A) For a Non-Collecting Retailer that filed a complete Annual Customer Information Report within 30 days of the due date, $1,000;

(B) For a Non-Collecting Retailer that reasonably had no knowledge of the requirement and filed a complete Annual Customer Information Report within 60 days of demand by the Department, $50,000;

(C) For a Non-Collecting Retailer that sells only tangible personal property that is not taxable in Colorado or sells tangible personal property only to Colorado Purchasers that are not subject to sales or use tax, no penalty shall be collected.

(D) [Expired 05/15/2018 per House Bill 18-1253]

(E) [Expired 05/15/2018 per House Bill 18-1253]

(iii) The Executive Director of the Department may waive all or any portion of the penalty for other reasonable cause shown.

39-21-112(3.5)

38 CR 03, February 10, 2015, effective 3/2/2015

40 CR 22, November 25, 2017, effective 1/1/2018

41 CR 14, July 25, 2018, effective 8/14/2018

41 CR 20, October 25, 2018, effective 11/14/2018

42 CR 05, March 10, 2019, effective 3/30/2019

44 CR 05, March 10, 2021, effective 3/30/2021

46 CR 03, February 10, 2022, effective 3/2/2023

46 CR 06, March 25, 2023, effective 4/14/2023