Senate Finance Committee to Hear SB-6, “Electronic Sales & Use Tax Simplification System,” Today

SB-6, “Electronic Sales and Use Tax Simplification System,” will be heard this afternoon when the Senate Judiciary Committee convenes for a meeting at 2 p.m. in Senate Committee Room 357.

The sponsor is Senator Angela Williams (D-Denver).

In 2017, the legislature created a three-year task force, the Sales and Use Tax Simplification Tax Force, to study the system and recommend bills to improve it.  One result of that work is SB-6.

Here’s the Legislative Council’s summary of the bill:

Sales and Use Tax Simplification Task Force. The bill requires the department of revenue (department), within existing resources, to conduct a sourcing method in accordance with the applicable provisions of the procurement code, and any applicable rules, for the development of an electronic sales and use tax simplification system (system). The bill also requires the department to involve stakeholders to develop the scope of work.

The bill specifies that on and after the date the system is online the department is required to accept any returns and payments processed through the system for state sales and use tax and for any sales and use taxes that are collected by the department on behalf of any local taxing jurisdiction.

The bill specifies that it is the general assembly’s intent that a certain number of local taxing jurisdictions with home rule charters voluntarily use the system when the system comes online. Additionally, the bill states that it is the general assembly’s intent that all local taxing jurisdictions with home rule charters voluntarily use the system within a specified number of years.

The bill’s Fiscal Note provides the background and analysis of the proposal:

Summary of Legislation

This bill directs the Department of Revenue (DOR) to solicit an electronic sales and use tax simplification system through the state’s procurement code.  DOR must work with stakeholders to determine the scope of work for the system before soliciting bids for the creation of the system.

The system is required to accept sales tax returns and payments for state and state-collected local jurisdictions.  Home rule jurisdictions may choose to use the system.

The bill requires that the solicitation process for the new system be managed within existing resources.

Background

During the 2018 legislative session, House Bill 18-1022 required the DOR to issue a Request for Information (RFI) for an electronic sales and use tax simplification system.  The RFI responses addressed the following system specifications:

  • accurate address location capability;
  • a single application process for state and local tax licenses;
  • a uniform remittance form;
  • a single point of remittance;
  • a taxability and exemption matrix; and
  • access to data in the system for auditing or revenue projection purposes.

In addition, the system must:

  • be able to interface with existing tax administration systems;
  • allow for changes to tax bases or jurisdictional boundaries;
  • comply with the Office of Information Technology’s (OIT) security standards and policies;
  • collect taxes on items with differing tax rates in the same jurisdiction; and
  • maintain a history of any changes.

The responses to the RFI received by the department were presented to the task force during the 2018 interim.  Cost estimates for the system ranged from $1.25 million to $18.75 million with ongoing annual costs between $5 million and $8 million for the lower estimate and indeterminate ongoing annual costs for the higher estimate.

For more information on SB-6, contact Loren Furman, Chamber Senior Vice President for State and Federal Relations, at 303.866.9642.

For recent news media coverage of this issue, read:

“Colorado’s sales tax collection quagmire subject of bill on Day 1 of General Assembly,” by Joe Rubino, The Denver Post, January 4th.

“Colorado legislature faces complicated debates over sales-tax simplification,” by Ed Sealover, The Denver Business Journal, January 8th.

“Businesses get grace period to comply with new state sales tax rules,” by Rachel Riley, The Gazette, Colorado Politics, December 7th.