Four years ago, Colorado enacted a law imposing burdensome use tax reporting and notification requirements on out-of-state retailers that do not collect Colorado sales tax on sales to Colorado consumers. The law was immediately challenged in federal court on the basis that it discriminated against interstate commerce, preventing the Colorado Department of Revenue from enforcing the law until last month when the U.S. Court of Appeals for the Tenth Circuit ruled in favor of the state of Colorado. This law affects all retailers that do not collect sales tax and have more than $100,000 in gross sales in Colorado during a calendar year, including California wineries that ship wine directly to Colorado consumers.
Use tax is the same rate as the sales tax. Colorado, as do most states, requires residents to pay use tax on purchases that did not include Colorado sales tax, such as those from out-of-state retailers. However, due to lack of enforcement and unawareness, very few consumers self-report and pay use taxes. The use tax reporting and notification requirements only apply to retailers that do not collect sales tax. For this reason, wineries may wish to consider “voluntarily” collecting Colorado sales tax on direct wine shipments.
For an in-depth discussion of the use tax reporting and notice requirements, and specifics on how they relate to wineries, read “New Colorado Sales Tax Reporting Requirements Could Affect Wineries” on the ShipCompliant Blog. ShipCompliant is working with the Colorado Department of Revenue to resolve outstanding questions and will post updates on its blog as new information becomes available.