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Understand Colorado's complex sales tax system
What You Need to Know About Colorado’s New Sales and Use Tax System
byJanuary 25, 2022
If you’re a fan of skiing or snowboarding, you love Colorado for its ski resorts. But if you’re an online merchant, you’re probably not as enamored with Colorado, as the state’s regulations are known to present enormous challenges when it comes to staying compliant. Because of their unique “Home Rule” city system, certain cities can set their own sales tax rules, rates, and laws. Sellers in Colorado have to collect, file, and remit sales tax in each of these cities separately, as well as the state through the Colorado Department of Revenue. You can imagine the headache that caused sellers – perhaps you’ve even had to experience it yourself. Luckily, Colorado has implemented a new system that makes filing a little easier on sellers.
Colorado’s Home Rule Cities
The state of Colorado has 70+ Home Rule cities. For sales tax collection purposes, this means that when making a sale to a buyer in a Colorado Home Rule city, you are required to collect Colorado’s state sales tax rate, any county or special taxing district rates, and the Home Rule city’s sales tax rate. So far, this is just the same as if you were collecting sales tax from a buyer whose ship-to destination was in a non-Home Rule city.
The tricky part comes when it’s time to file Colorado sales tax. Instead of filing once with the state, Colorado’s Home Rule cities require that you file and remit the sales tax collected from buyers in those cities straight to each Home Rule city. Until recently, this meant sellers had to file in each of the 70+ home cities individually. Enter Colorado’s new Sales and Use Tax System, or SUTS, for short.
New Sales and Use Tax System
SUTS is a new online portal through which merchants can file and pay collected sales tax to approximately 40 of Colorado’s 70+ Home Rule cities.
The SUTS Portal is a hub for collecting and remitting sales and use tax for state, state administered and home rule administered jurisdictions in an easy, automated, and seamless fashion.
The system has the following capabilities:
• Accurately look up sales and use tax rates by address
• Single point of remittance and a uniform remittance form
• Taxability and tax exemption matrix
• Ability to calculate tax rates on items with differing tax rates in the same jurisdiction
• A record of the history of any changes
The two vital elements of SUTS are the Remittance Portal and the Geographic Information System (GIS). The SUTS Remittance Portal is vital because it lets sellers file sales tax returns for state, state-administered, and participating home-rule self-collecting taxation jurisdictions all in one place.
The other element is the GIS, which helps merchants identify the taxing jurisdictions of taxable goods and services and provides tax rates by address. In addition, the GIS offers sales tax information for counties, municipalities, and special taxation districts, which ultimately ensures merchants collect the right amount of sales tax from consumers.
Today, TaxJar supports state-administered filings in Colorado. TaxJar is looking to support SUTS participating home rule jurisdictions in Colorado in the future. For now, TaxJar customers must file returns for Home Rule jurisdictions manually.
Colorado State Guide
For companies looking to become sales tax compliant in Colorado for the first time, this can sound overwhelming. A comprehensive Colorado sales tax guide can help make the task easier — so we’re providing one for you! Inside our free Colorado Sales Tax Guide, you’ll find all the tools you need to be successful when it comes to managing your sales tax obligations in Colorado.
Set your business up for compliance in 2022
Learn 6 key steps to attain sales tax compliance now -- and in the future -- with this 2022 Sales Tax Preparedness Guide.Download the 2022 guide