Colorado Capitol Report

New State Law Shifts Colorado to a Market-Based Sourcing Tax Method


New State Law Shifts Colorado to a Market-Based Sourcing Tax Method

Recently, Governor Hickenlooper signed House Bill 18-1185 which moves Colorado from the single sales factor method of tax apportionment to a market-based sourcing method.  This new law changes the apportionment method for corporations that do business in multiple states and helps prevent service companies such as law firms, accounting firms and other service providers from double taxation.

The CACI Tax Council worked with the Office of the Governor, the Department of Revenue and the Office of Economic Development beginning in October 2017 to ensure that the legislation did not adversely affect Colorado businesses.  During those meetings, Tax Council members provided modifications to the initial drafts of the legislation which were ultimately adopted.  Long-time CACI Tax Council member, Bruce Nelson, Director of State & Local Tax, EKS&H, as well as Loren Furman testified in support of the bill.

Prior to the passage of House Bill 1185, the current law provided that income from the sale of services and intangible property is apportioned based on where the income-producing activity is performed. The new changes those sourcing rules and income will now be apportioned based on where the income-producing activity is used or delivered.

How lawyers, architects and other service firms will benefit from Colorado tax change,” by Ed Sealover, Denver Business Journal, June 13th.

Please contact Loren Furman at lfurman@cochamber.com or at 303-866-9642 if you should have any questions regarding this legislation.


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