Colorado takes a different approach to Taxing the Internet

This post is in: Business


We’ve been talking all week about Internet tax, and nexus – how state governments are trying to drag Internet retailers into their states and force them to collect sales tax. We’ve talked about North Carolina, Texas and New York, as well as states that want you to impose a sales tax on digital downloads. In today’s post, we’re looking at Colorado, and how it adopted an entirely different approach to taxing the Internet.

In March of 2010, Colorado joined the Internet tax fray. But, rather than go the New York route, which has led to lawsuits, Colorado decided to try something else. Their law doesn’t require Internet retailers to collect the tax. Instead, Colorado is asking Internet retailers to tell customers of their use tax obligation at the time of purchase. And, just in case consumers don’t get the message and do the right thing, Colorado requires qualifying Internet retailers to prepare a report to the state once a year, detailing the names, addresses and purchase histories for their Colorado-based customers.

To qualify, Internet retailers must sell $100,000 or more into Colorado in a year, and must only report purchasers who have an aggregate of $500 or more in purchases each year. So for many smaller retailers, it’s not an issue.

You could say that this legislation is better for Internet retailers, because it doesn’t make them responsible for collecting the tax (and liable for paying it if they don’t). At the same time, the amount of work involved in tracking CO-based sales is going to be just about the same. The only thing that’s different is whether or not you’ll be writing a check.

States are watching Colorado with great interest, along with the Multistate Tax Commission, a quasi-governmental organization that is trying to get states to act collectively when it comes to sales tax issues. Oklahoma liked what they say, and enacted legislation of their own this year. Retailers selling into Oklahoma must advise customers of their individual use tax responsibilities on each purchase, including having information available on their websites. Retailers are given time to adjust though – no penalties for non-collection will kick in for Internet Retailers who register with the state between now and July 11, 2011. After that, Internet retailers who don’t voluntarily register to collect use taxes from Oklahoma residents, and send them in on a regular basis, could be subject to sales tax audits, fines and penalties.

For more information, follow the links below to:

Colorado Department of Revenue’s website
Oklahoma Tax Commission Legislative Report


  1. Great work keep it coming, best blog on earth

  2. Great work keep it coming, best blog on earth

  3. Really nice post,thank you

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