Do You Need to Get a Sales Tax Permit in Colorado?
Quick Answer: You need to get a sales tax permit in the state of Colorado if you have physical presence or meet economic nexus requirements. Read on for more detailed information.
What is Sales Tax Nexus Anyway?
Your business owes sales tax in any state where it has “sales tax nexus.” In short, if you have sales tax nexus you need to collect and remit sales tax. If you don’t have sales tax nexus, you generally don’t need to get a permit.
Sales tax nexus is a legal term that means you have crossed a threshold and now have a sales tax collection responsibility in the state. Nexus can be created by having a physical presence, an economic presence, or by other factors. Nexus rules vary by state and retailers have specific nexus rules based on where they have people, property or inventory.
What Should You Do Once You Determine You Have Sales Tax Nexus?
Once you determine that you have sales tax nexus in Colorado, your next step is to register for a sales tax permit in the state. Check out our blog post on getting a sales tax permit in Colorado for more information about that process.
If you are not interested in doing the work of getting the permit yourself, TaxValet can handle the permit registration for you with our Sales Tax Permit Registration service.
Common Ways to Have Sales Tax Nexus in Colorado
1. Economic nexus in Colorado
If you made more than $100,000 of sales into Colorado, then you are required to register for, collect, and pay sales tax to the state. If you meet this threshold, it does not matter whether or not you have a physical presence in Colorado. Nexus has been created based on your volume of sales.
For more information, see the Colorado Department of Revenue Tax Division.
If you need help determining which states you have crossed economic nexus thresholds, check out our Sales Tax Starter Kit service.
2. Physical presence in Colorado
The following creates physical presence nexus in Colorado. If you have any of the following in Colorado, you will need to get a sales tax permit with the state:
a. An office or place of business, such as a retail store.
b. A warehouse or inventory stored in the state.
c. Employees in the state.
For more information, see “Retailers with Physical Locations in Colorado” in the Colorado Sales Tax Guide.
If you need help determining which states you have physical presence in, check out our Sales Tax Starter Kit service.
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Do You Need a Sales Tax Permit in Colorado If You Only Sell on Marketplaces?
If you are an online retailer who ONLY sells on approved marketplaces (such as Amazon, eBay, etc), Colorado sales tax will be remitted by the marketplace and you do not need to get a sales tax permit based on the physical location of your inventory. For more information, see HB19-1240.
If you are an e-commerce seller who is unsure of where you need to get a sales tax permit, check out our Sales Tax Starter Kit service. In fact, if at any point you are stuck and want a team of experts to handle all of this for you, don’t hesitate to contact us.
Notice and Reporting Laws
Colorado’s Notice & Reporting Law states that any online seller who is not already required to collect sales tax in Colorado, but who has gross sales of more than $100,000 in sales from buyers in Colorado, must do the following:
- Provide notice to your Colorado buyers that use tax is due.
- Provide to your Colorado buyers with purchases over $500 an annual summary of their purchases so that they can pay use tax. You must also provide this information to the Colorado Department of Revenue.
For more information see the Code of Colorado Regulations, Rule 39-21-112(3.5).
Home Rule Cities in Colorado
In addition to state sales tax, Colorado also imposes city sales tax. You can remit some of the city tax directly to the state, however, some cities, called “Home Rule” cities, administer their own sales tax collections. If you have nexus in a “Home Rule” city, you will need to apply for a sales tax permit directly from the city. You will also be required to remit taxes directly to the city.
For more information about Home Rule cities, see the Colorado Sales Tax Guide.