10/11/2018
The cost of living in this State just went up significantly! If you buy goods from a local small business like mine, you WILL be paying more. This also applies to out-of-state retailers that have more than 200 transactions or $100K in state sales.
**Sorry in advanced for the length of this post!**
The state just changed how retailers will be required to collect tax beginning December 1, 2018. For decades, taxes were based on where the product was sold from. Tax was based on the taxing districts the seller and the buyer had in common. For Example, my business is located in the City limits of Brighton Colorado. I am required to charge tax on goods sold; Brighton City 3.75%, County 0.75%, State 2.9% and Special Taxing districts RTD/CD/FD of 1.1% for a grand total of 8.5%. If I sell a computer to someone in Brighton, I collect 8.5% sales tax on top of the price of the good. If I sell to someone in Sheridan (a home rule city in the middle of Denver), I collect on our common taxing districts which would be the Special District tax and State tax. If sell to someone in Fort Collins, I simply collect State tax. No problem. I have 3 tax groups to juggle, everyone I sell to would fall into one of 4 categories (including tax-exempt). When I fill out my Sales Tax form for the Quarter, I do one with the State and one with my home rule city of Brighton. Easy enough… until now.
All of this will change as of December 1. I will have to keep track of every taxing district in the State. For example, if sell a computer to someone in Sheridan, instead of simply collecting State Tax and Special District tax, I will have to collect Sheridan City tax 3.5% and Arapahoe County tax of 0.25%. On top of that, I will be required to purchase a Sheridan City Sales Tax License of $65 and file a Sales Tax return directly with the City of Sheridan. This is a significant amount of work for a small business like mine, especially considering there is a very thin margin on computer sales.
Currently the State of Colorado collects sales tax for 50 counties, and 150 municipalities. Two counties self-collect tax and there are about 73 different home-rule cities in the state that require special sales tax licenses and forms to be filed directly with them. With these new changes I would have to maintain a sales tax license and/or file a completely separate sales tax return with each home-rule city I do work with. Instead of assigning a customer one of four possible tax groups (including tax exempt), I will have to keep track of hundreds! Currently I have 2 taxing authorities I have to send a check to; State or Colorado and the City of Brighton. That will potentially grow to 76. In addition to the 3 taxing districts I have to collect tax for now, I will have to start collecting sales tax for 13 state-collected cities and 7 state-collected counties and 27 home-rule cities (based on the last 18 years of business). Keeping track of the state collected cities and counties won’t be a huge issue since it will just be a separate line item on an existing State form, it is all the home-rule cities that require direct payments and special sales tax licenses that will add significant work to maintain. If I was a state-wide business, I would be looking at about 275 separate taxing districts I would have to track! Bureaucracy at its finest!
This will not affect your local “mom & pop’s” store. They have physical location you go to pick up the merchandise from. You pay the tax based on where they are located. But for a small, service oriented businesses such as mine it means a significant administrative cost increase. If I resell any hardware I am obligated to collect the appropriate tax where I deliver the equipment and pass the additional administrative costs of collecting and filling sales tax forms with the appropriate authority.
As you know, business do not pay tax, they only pass that tax on to their customers in the form of higher costs of goods. Not only will my customers be hit with the additional costs because of higher tax rates, they will also have to pick up the additional cost it takes to collect and pay that tax. I understand it is necessary to collect tax to run the essential parts of government but this level of bureaucracy is an undue burden on small business. I know this sound like a bit of an exaggeration, but this really makes me want to close my doors and buy a snow cone business in the tropics -- probably not a bad idea anyway.
Be sure to thank your greedy Politicians and Government Officials for this one!
