OUR THOUGHTS ON:

Colorado Issues Guidance Regarding Non-Collecting Retailer Reporting Requirements

State and Local Tax

By Jack Stewart

The Colorado Department of Revenue recently issued guidance regarding reporting requirements for retailers making Colorado sales that are not required to collect Colorado sales and use tax.

In 2010, the Colorado legislature passed a law imposing the reporting requirements on out-of-state vendors that was challenged in federal court.  The federal court issued a preliminary injunction barring Colorado from imposing its reporting requirements.  Later, the federal district court ruled that the law violated the Commerce Clause of the U.S. Constitution and made the injunction permanent.

That ruling was appealed to the U.S. Court of Appeals, which ruled that the federal district court did not have jurisdiction to rule on the case due to the Tax Injunction Act.  The case was remanded back to the federal district court to dismiss the Commerce Clause ruling and dissolve the injunction barring Colorado from enforcing the law.   

That injunction was dissolved on December 10, 2013.  The new guidance issued by the Department is a result of the dissolved injunction.

In the recently issued guidance, the Department stated that it will not be assessing penalties for failure to comply with the Colorado law for calendar years 2010 through 2013.  Also, it will not be imposing assessments related to the January and March 2014 reporting requirements regarding purchases made by Colorado residents in the 2013 calendar year.

A lawsuit and request for a preliminary injunction against the law was filed in state district court in Denver.  A hearing regarding the injunction is expected to take place in early January 2014.  Should an injunction be granted, the Department has indicated that it will issue additional guidance regarding the reporting requirements.

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