Presentation on theme: "Presenter: Alan Smith – Sales Tax Colorado, LLC. Sales Tax Colorado, LLC July 17, 2014 2 * Varied State vs. Local Laws and Rates * State and State-collected."— Presentation transcript:
Presenter: Alan Smith – Sales Tax Colorado, LLC
Sales Tax Colorado, LLC July 17, * Varied State vs. Local Laws and Rates * State and State-collected (statutory) cities, counties and special districts * Home-Rule Cities * Zip Code Issues * Mailing addresses don’t reflect actual jurisdiction * Address verification needed to determine correct jurisdictions and rates
Sales Tax Colorado, LLC July 17, * Increased Compliance Burden * Multiple Audits * Use Tax * Address example: 30 feet = $8656 vs. $16,159 Result: $7503 reduction in tax obligation!
Sales Tax Colorado, LLC July 17, * Multiple city registrations may be required. * Increased documentation requirements for local jurisdictions * Zero returns are often mandated. * Zip Code issues lead to errors in determining the correct city and rate. * Overpayment or undercharging can result and pose risk audit for both the vendor and the purchaser.
Sales Tax Colorado, LLC July 17, * City & Contract Auditors * Some home-rule cities use their own auditors while others use contract auditors. * If you are picked for audit by a contract auditor city, other cities may be invited to participate in the audit! * The Auditor may notify the State or other cities.
Sales Tax Colorado, LLC July 17, * Use Tax applies to service businesses, medical practices and nearly every other business! * Don’t believe the Myth! Reality: Internet purchases are not tax exempt. * Rate Differentials * Tax is due if the rate you paid is lower than your local home-rule city’s rate. * Food for office/ commercial establishment use
Sales Tax Colorado, LLC July 17, * Wow! This is a tough area for businesses. * Definitions of “Doing Business” vary. * Deliveries in company vehicles and installations are usually triggers. * Door-step delivery alone in Denver isn’t sufficient * One installation or more than one delivery can be considered sufficient.
Sales Tax Colorado, LLC July 17, * Construction * Delivery & Installation Charges * Information Services * Internet transactions * Manufacturing * Medical and Dental Supplies and Equipment * Software
Sales Tax Colorado, LLC July 17, * Contractors are often considered the end-user so they are to pay the sales or use tax. * Purchaser’s charitable/ not-for-profit exempt status may not pass through to contractor. * E.g. Denver taxes contractor’s materials sold to Denver
Sales Tax Colorado, LLC July 17, * Cities may consider more than one delivery per year in the company’s own vehicle or just one installation as sufficient for nexus. * For the State, collect only for common jurisdictions if no business presence in other delivery locations*. * Non-physical location Branch Id’s may be required by the State * CAUTION: One installation may be considered sufficient.
Sales Tax Colorado, LLC July 17, * Not a taxable service at the State level 1 * Some cities such as Denver do tax information services regardless of format. 2 * There may be exemptions for custom reports. * E.g. you hire a marketing company to conduct a specific survey for you. * Customized reports generated from existing information is not a custom report. * E.g. – An Advertising Company’s buy of rating information… customized, but not custom. * CCH or similar tax research resources
Sales Tax Colorado, LLC July 17, * If your state or local jurisdiction has an applicable use tax and would tax the sale at a brick and mortar store, use tax is due on the purchase. * Purchasers need to self-assess and remit use tax. * State-collected cities’ and counties’ use tax is limited to motor vehicles and building materials. * Home-rule cities usually do subject internet purchases to use tax.
Sales Tax Colorado, LLC July 17, * CO State doesn’t currently tax electronically delivered software, but did from March 1, 2010 to June 30, * Cities such as Denver and Greenwood Village tax software regardless of format. * Mandatory Maintenance Agreements are generally taxable. * Optional Agreements with even the right to receive potential upgrades are generally taxable.
Sales Tax Colorado, LLC July 17, * WHAT IS A MULTIPLE LOCATION FILER * A multiple location/jurisdiction filer is any entity filing sales or use taxes with the Colorado Department of Revenue with more than a single location, either physical or nonphysical. * WHAT IS REQUIRED OF MULTIPLE LOCATION FILERS * If your business will be selling, renting or leasing tangible personal property, you must get a sales tax license for each physical location. * Example: Account for Denver, CO * Account for Aurora, CO (Non-physical location – Can be triggered by installation work)
Sales Tax Colorado, LLC July 17, * CO State audits cover all DOR tax types * City audits – It’s about documentation. * Local issues focus – more detail required * Invoicing * “Ship To” delivery address vs. “Bill To” address * Verification * Prove taxable purchased items were never in their city. * Prove how the delivery was made and where it went. * Occupation Privilege Tax and other tax types too
Sales Tax Colorado, LLC July 17, * Having incomplete sales invoices with no documentation to support pickup or delivery * Not identifying the sales tax charged to a specific taxing jurisdiction * Not breaking out installation labor clearly on sales invoices * Not having written training materials regarding sales tax for personnel to use when preparing sales invoices or ringing up merchandise in a POS system * Not keeping copies of valid resale certificates on file when customers provide them
Sales Tax Colorado, LLC July 17, * No documentation substantiating the reasons for exemption from sales tax (i.e.-resale certificate, letter of exemption, exemption certificate, etc.) * Not understanding how their sales tax system works. For instance, collecting tax for jurisdictions but not being licensed and not remitting the tax collected * Improper reporting of sales tax to various taxing jurisdictions * Not reconciling their sales tax liability account each time they do reporting * Not identifying all delivery locations and the proper sales tax for each on a sales invoice
Sales Tax Colorado, LLC July 17, * Not identifying all items on invoices that are subject to use tax accrual based on the taxing jurisdiction’s code(i.e. - items such as fuel surcharges) * Not accruing Denver use tax on manufacturing equipment in enterprise zones * Locking in on one vendor for use tax accrual and ignoring new vendors providing the same items * If providing supplies from a central warehouse, not accruing use tax for those supplies if not previously taxed * Depending on accounting systems to identify purchase invoices subject to use tax but not verifying the accuracy of the system
Sales Tax Colorado, LLC July 17, * Remitting use tax accrued to the wrong jurisdiction * Making sure use tax accruals are done based on the taxing jurisdiction’s tax code for what is taxable * Not accruing use tax on withdrawals of inventory for their own use * In Denver, not accruing use tax on all costs that are part of the manufactured cost for items where a retail market exists * Not accruing use tax on leases or rentals of equipment used in a taxing jurisdiction
Sales Tax Colorado, LLC July 17, * What if you paid the wrong city’s tax? * Auditing city may seek the tax directly from the receiving city * Requires your written authorization * Credit only for tax legally due. * Paying tax to an unlicensed vendor is between you and the vendor. City will still want their tax! * Caution: Some Cities are limiting their refund period on intercity claims.
Sales Tax Colorado, LLC July * TIP: Evaluate and resolve past liabilities, register and file a return, limit the look-back period, and minimize your future liability. * TIP: Minimize use tax obligations by using your proper city name in your address and notify vendors of your true location and tax rates. * Are your products and services taxable? * Verify your Colorado customers’ true locations. * Are you prepared for an audit?
Sales Tax Colorado, LLC July 17, * What do you do when you’ve discovered significant prior obligations? * 3 rd party anonymous voluntary disclosure may be the right answer. * CO State and Home-Rule cities are generally willing to limit the look-back to three years and to waive penalties. * If tax wasn’t collected, some are even willing to have you just register and comply going forward.
Sales Tax Colorado, LLC July 17, * Filing A Return Limits Look-Back. * Are your clients registered in every state and home- rule city where they’re filing income tax returns, making deliveries or performing installations? * Are your client’s products and services taxable? * What about Use Tax? It impacts nearly every business. * Are clients merging, buying or selling a business? * Help clients by letting them know about the CO State-certified address database.CO State-certified address database * How do your clients handle exemption certificates?
Sales Tax Colorado, LLC July 17,
Sales Tax Colorado, LLC July 17, Alan Smith ISALES TAX COLORADO, LLC I 992 S. 4 th Ave., STE BRIGHTON, CO Phone: Web: