New Colorado Legislation Paves Way to Simplification of Sales and Use Tax Compliance

Colorado recently passed several bills sponsored by the Sales and Use Tax Simplification Task Force to streamline sales and use tax compliance. On April 4, Gov. Jared Polis signed H.B. 24-1041, which makes two important changes to sales and use tax collection and compliance. First, jurisdictions not using the Colorado sales and use tax system (SUTS) are prohibited from collecting sales and use tax from retailers lacking physical presence in the state unless the retailer voluntarily chooses to remit tax. Second, the threshold for quarterly filing eligibility will be increased from $300 to $600 per month starting January 1, 2025, with other increases allowed beginning January 1, 2026, without additional legislation. 

On April 19, Polis signed S.B. 24-023 to address potential tax calculation errors made by vendors that rely on the Department of Revenue’s geographic information system for jurisdictional and tax rate determination. The state and localities will hold businesses harmless for any audit deficiency stemming from a difference in tax calculated in reliance on the system.

The same day, Polis also signed S.B. 24-024 to foster uniformity across local taxing jurisdictions for the collection and remittance of local lodging taxes. S.B. 24-024 prohibits local jurisdictions from imposing on an accommodation’s intermediary additional reporting requirements that are not similarly applied to all marketplace facilitators that must collect and remit local taxes. The term “accommodation’s intermediary” is defined as a marketplace facilitator for transient lodging. The bill essentially prohibits localities from imposing disparate treatment on lodging-specific facilitators and ordinary marketplace facilitators. 

Finally, on May 1, Polis signed S.B. 24-025, a “housekeeping” bill to revise, modernize, and harmonize statutes governing the state administration of local taxes. Generally speaking, the bill makes clear that the Department of Revenue collects, administers, and enforces local government — that is, statutory cities or home-rule cities that request state administration — sales or use tax in the same manner as it does state sales tax. 

To learn more about how BDO can help you navigate state and local tax changes, please visit our State & Local Tax Services or Sales & Use Tax page.

BDO Insights

Taxpayers Potentially Affected

  • Taxpayers that have sales, but no physical presence, in Colorado can potentially reduce their compliance burden and costs. A complete list of jurisdictions participating in Colorado SUTS is available here. The five most populated Colorado cities (Denver, Colorado Springs, Aurora, Fort Collins, and Lakewood) all use the system and therefore will not be affected by H.B. 1041. Taxpayers filing low-liability monthly sales and use tax returns in Colorado should confirm their eligibility to switch to quarterly filing starting January 1, 2025. Taxpayers should also be aware that H.B. 1041 gives the executive director of the Department of Revenue the ability to increase the monthly tax threshold starting January 1, 2026.

Identifying Additional Colorado Tax Issues

  • Colorado local sales and use tax compliance remains a complicated and unique burden. However, H.B. 1041 does simplify compliance for remote nexus retailers in some situations, while providing additional incentives to bring those lagging jurisdictions into compliance with SUTS.