House Bill 1245 Shifts Costs at the Expense of Businesses

The Colorado Senate is scheduled for a final vote of HB 1245 today, which restructures the state’s vendor allowance system for sales taxes.

Colorado’s sales tax collection system is the most complicated in the country. Complying with and administering this system is costly and time-consuming for businesses – from the labor involved in preparing the sales tax returns, the professional accounting firms, like, necessary to ensure the process is handled properly, complying with state audits, and liability costs associated with sales tax collection.

Due to real costs imposed on businesses for essentially serving as the state’s tax collector, retailers are currently granted a vendor allowance that lets them to keep a certain percentage (3.3%) of the sales taxes they collect in order to recover these costs. HB 1245 restructures this vendor allowance system in order to create a new source of revenue for state affordable housing programs and the reinsurance program.

While the bill actually increases vendor allowance from 3.3% to 4%, it imposes a cap of $1,000/month on how much a retailer can keep. This benefits some businesses at the expense of others, essentially shifting costs in order to create a new source of revenue for the state. The result is an increased tax burden on retailers that collect millions of dollars in sales taxes on behalf of the state.

The Colorado Chamber urges a “no” vote on HB 1245.