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Tax Law

Colorado Proposes a Series of Regulations to Address Digital Taxation

The Colorado Department of Revenue has proposed several regulations related to taxation of digital goods, remote sales, and marketplace collection. First, it proposed a “doing-business” rule, which clarifies a person maintains a business in Colorado if the person meets the economic nexus test of $100,000 annual retail sales in Colorado. It also proposed another rule that provides guidance on when a retailer must obtain a sales tax license, including those doing business in Colorado for economic nexus purposes, as well as a sourcing rule clarifying when retail sales are sourced to Colorado.

Next, it proposed a special rule that establishes requirements and conditions for marketplace sales. The marketplace facilitator must collect and remit state-level and state-administered local taxes and must acquire a single sales tax license for both direct and facilitates sales unless functions performed by distinct entities. A marketplace seller is only relieved of collections obligations if they have obtained a certification that the marketplace facilitator will collect Colorado taxes.

In addition, the Department of Revenue also proposed amendments to its tangible personal property definition. The amendments note that the method of delivery does not impact the taxability of a sale of tangible personal property and offer clarifying examples: e.g., purchasing a downloaded movie is the same as purchasing a tangible DVD.