As I mentioned at Affiliate Advocacy, Colorado is now taking steps to tax online purchases by requiring out of state merchants to collect and remit the sales and use tax. You can read the details at Rocky Mountain Lows.
Colorado Governor Bill Ritter has stated that the Department of Revenue will adopt regulations that will implement the changes needed to enforce the “existing law”. Governor Ritter stated, “Though this will equate to new revenue to the State, this is not a change in tax policy; but rather, is an enforcement of existing law.”
The estimated increase in revenue is $5 million annually. He anticipated a July 1, 2010 start for the new level of enforcement of the nexus law.
I am unsure of exactly what steps Colorado needs to take to adopt new regulation. I have received conflicting answers. One answer I have received is that the legislators do not need to do anything, the revenue department is empowered to do what is needed to make this take effect. The other answers are that legislators will need to pass budget with this proposal intact or that they will need to pass a new act.
You may recall that prior to passing their version of the affiliate tax, North Carolina indicated that they didn’t really need to do it and that the revenue department could take whatever steps they needed to require the collection. That was the back up plan. It seems like this alternate path may be one that many other states take. Guess we can call it the “Quiet Affiliate tax”.
Combine this quiet approach with the approach of other states that are conducting audits and with the states that are working on legislation (Maryland, California, Florida…) we are in for a hectic year. Merchants should begin to explore the alternative of collecting the sales tax. There are companies that perform and simplify these tasks.
I recently posted a brief interview with Avalara. This would probably be a good time for merchants to read that and then follow up with them to learn more about real solutions.
See complete text of the budget proposal – Budget Reduction Proposal