Colorado: Sales Tax Handbook
What constitutes sales tax nexus in Colorado?
One of the more complicated aspects of Colorado sales tax law is sales tax nexus, the determination of whether a particular sale took place within the taxation jurisdiction of Colorado, and is thus subject to state (and possibly local) sales taxes.
If a vendor's transactions are determined to have nexus in Colorado, the vendor must register for a Colorado sales tax license and collect appropriate sales taxes from the buyer for all transactions with nexus in the state. On this page, we have compiled some of the most commonly needed facts about what constitutes sales tax nexus in Colorado.
Sales Tax Nexus in Colorado
Colorado defines tax nexus as any activity that is connected to the "selling, leading, or delivering" of tangible personal property to the end-consumer for use, storage, or consumption within the borders of the state.
You are considered to have nexus within Colorado if your business is "doing business" within the state by meeting any of the following requirements: maintains any physical facilities (such as an office, warehouse, or storefront) or personnel soliciting business (salespeople, etc). Colorado also considers any regular advertising directly targeted at residents of Colorado via catalogues, newspapers, radio, etc. to constitute tax nexus.
If your business meets any of these qualifications, you are considered to be doing business within the state of Colorado.
For additional details on sales tax nexus law in Colorado, see the nexus information page from the Department of Revenue at https://www.sos.state.co.us/CCR/GenerateRulePdf.do?ruleVersionId=4753
Taxation of Internet-Based Sales in Colorado
NOTE: 2018 Supreme Court Ruling Regarding Online Sales Taxes
In the 2018 Supreme Court case South Dakota vs. Wayfair Inc, Et Al., the court overturned a previous ruling that required a merchant to have physical nexus in order for a state to collect sales tax. This means that any state is now free to enforce collection of sales taxes on out-of-state online merchants. The information provided here may be subject to change, and many states are expected to begin collecting online sales taxes following this ruling.
Depending on the situation, Colorado may or may not charge sales tax on Internet-based transactions.
The nexus status and taxability of Internet-based sales, by vendors and/or consumers within Colorado, have been the subject of hot debate in recent years. You can learn more on our introduction to Internet-based sales taxes.
Does my business have tax nexus in Colorado?
The folks at the sales tax compliance company Avalara are an approved Colorado sales tax partner, and you can use their free Colorado nexus wizard tool to determine whether or not your business has nexus, and is therefore required to pay Colorado sales taxes. If you're interested in automating your sales tax collection and filing process, click here to get more information.
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