Not ready: Sales taxes on internet purchases ill-timed

Cross Currents: A column by Bill Christopher
Posted 6/26/19

It seems that our State Legislature jumped the gun this past legislative session with implementation of imposing and collecting sales and use taxes on destination-based internet purchases of goods. …

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Not ready: Sales taxes on internet purchases ill-timed

Posted

It seems that our State Legislature jumped the gun this past legislative session with implementation of imposing and collecting sales and use taxes on destination-based internet purchases of goods.

Effective June 1, most retailers are mandated to collect and remit sales taxes not only for the State of Colorado but also for those municipalities, counties and special districts like RTD which do not collect their own sales and use taxes.

Previously, if a retailer had a physical presence in a given governmental entity, it was obligated to collect and remit such sales taxes like a Walmart or Target Store. Now, regardless of any brick and mortar stores in the political jurisdictions, they are obligated to carry out this function. This applies to both in-state as well as out-of-state retailers.

So, what’s the big deal?

Plenty of tax rates to sort out

First, it is important to acknowledge that in Colorado we have a plethora of towns, cities, counties and special districts with the authority to impose sales and use taxes. In turn, this creates a large number of combinations of taxing layers which now all retailers selling on the internet must cope with.

Each local governmental entity has its tax rate and what commodities are to be taxed. They also normally require a business license and a sales tax license to do business in the respective jurisdiction.

So, retailers find themselves having to not only purchase such licenses outside their home base but also determine what tax rate is applicable for each sale, collect the correct amount of sales tax and remit it to the state of Colorado.

A problem with programming

The problem lies in the fact that the computer software programming at the state level to do all the sorting and calculating for all combinations of taxing layers does not yet exist.

While Senate Bill 6 stated “the objective is to take the next step toward development and implementation of electronic sales and use tax simplification system to be used by the state and local taxing jurisdictions for acceptance of returns and processing of payments,” the implementation date was way off the mark.

While the Legislature called for a June 1 implementation date — which probably never was realistic — some officials say it will be October or perhaps even later before the new system is up and running.

In the meantime, small retailers are struggling to comply. However, businesses with less than $100,000 in annual sales are exempt until the new system is operating. Obviously, the state’s right hand didn’t know what the left hand was thinking or what its capability might be.

Home rule cities will decide whether to join state system

In addition, I should point out that home rule cities like Westminster, Arvada and Thornton all administer their own sales and use tax enforcement programs. That way, they are not tied to what the state might not tax — like groceries.

Plus, municipal governments tend to believe they can administer tax enforcement more accurately and efficiently than the state government.

The point here is that home rule cities may or may not join with the state in a common “one stop shop” for retailers to make it as easy as possible on their side of collecting and remitting the taxes.

Stay tuned, but regardless you should expect to pay sales tax on most if not all of your internet purchases.

Points to ponder regarding guns

Here’s a thought-provoking statistic to ponder: We recently honored those who fought on the Normandy beaches to defeat tyranny imposed by the horrible Nazi regime. We recall that 2,501 Americans made the ultimate sacrifice on June 6, 1944 to protect our freedom and another 1,913 Allied soldiers also died that day. Combined together, 4,414 military personnel were killed that infamous day.

By late April of this year, more Americans had been killed by guns than the 4,414 personnel who died at Normandy. This data comes from the Gun Violence Archive, which notes that the figures do not include suicides.

Think about that: According to the Global Data Exchange at the University of Washington, there have been more homicides involving guns in America in 1990 alone than experienced from 1990 through 2017 in the United Kingdom, Canada and Germany combined.

Wow, is that alarming! Well, it should be, but Americans seem numb to such facts.

Voter approval required

While all the hoopla and attention in the Denver mayoral run-off election focused on incumbent Mayor Michael Hancock winning a third term, there was an interesting spending question on the same ballot. Proposition 302 addressed the question of Denver city officials putting in a bid for future Olympic Games.

In the past, the norm has been for wannabee cities to submit their bid without seeking approval from the voters. In the case of Proposition 302, Denver will now have to gain voter approval ahead of submitting any such proposals.

Good public policy

It was good to see this procedural policy question nailed down in Denver. It overwhelmingly passed at approximately 80% requiring voter input before Denver officials can throw their hat in the ring. This is good accountability and appropriate checks and balances.

As we all know, hosting the Olympic Games can be a huge expense which the taxpayers usually have to pay. While some city and state officials might like the prestige of being the host city, the taxpayers should have the right to give a thumbs up — or a thumbs down.

Bill Christopher is a former Westminster city manager and RTD board member. His opinions are not necessarily those of Colorado Community Media.

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