In an effort to encourage (or some might say “force”) out-of-state retailers to register to collect and remit Colorado sales and use tax, Colorado Gov. Bill Ritter (D) signed HB 1193 on February 24, 2010, which imposes onerous reporting requirements on out-of-state retailers. While HB 1193 was originally drafted and introduced as “New York style legislation” that targeted out-ofstate retailers with relationships with in-state “associates,” HB 1193 mutated into reporting requirements. HB 1193 requires that every retailer that does not collect Colorado sales tax on sales to Colorado purchasers must comply with the following reporting requirements:

  • Notify Colorado purchasers that sales or use tax is due on certain purchases from the retailer and Colorado law requires the purchaser to file a sales and use tax return;
  • Notify the Colorado Department of Revenue (Department) by January 31st of each year of all sales to Colorado purchasers, including dates and amounts of purchases and category of purchase.

Out-of-state retailers that fail to comply with these reporting requirements are subject to a $5 penalty for failure to notify the customer, a $10 penalty for failure to notify the Department and a $10 penalty for each purchaser not included in the report to the Department.

In light of the fact that the reporting requirements are effective March 1, Colorado issued Emergency Regulation 39-21-112.3.5 (“Regulation”) which adds further color to the Department’s expectations for the reporting obligations. The Regulation sets forth the language that must be provided on each invoice to a Colorado customer.

As a result of this twist in state efforts to require out-of-state retailers with no physical state presence to collect and remit sales and use tax, further developments on the constitutionality and enforcement of Colorado’s reporting is expected.