1. Does a Company’s presence in Colorado create nexus sufficient to require the collection of sales or use tax? 2. Does a Company’s presence in Colorado create nexus sufficient to require corporate income tax filing and payment?

Company manufactures and distributes tables and chairs. Company is incorporated outside of Colorado and has no office, equipment, or employees in Colorado. Company does not directly advertise in Colorado and Company uses common carriers to deliver its products. Company performs warranty work in Colorado, which has totaled three days of work in the past three years.
Sales & Use Tax Income Tax Nexus State Tax Nexus
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Tax Professional Answers

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Alan Smith
Determining “Nexus” or “Doing Business” as it’s referred to in Colorado is usually very fact specific. There are also some common triggers that apply in many states such as owning assets and having employees or independent contractors in the state, especially if they solicit business.

Colorado also has 70+ local towns and cities such as Denver, Aurora, Broomfield, Colorado Springs, Thornton, etc. that are home-rule and have their own definitions of “Doing Business”.

For example, the very first sale and delivery in a company-owned vehicle is considered to be “Doing Business” and thus requires licensing and remittance of sales tax in Breckenridge. Generally, the first sale involving installation is considered sufficient to require licensing and the collection and remittance of sales tax for home-rule cities and in State-collected jurisdictions.

Many businesses miss registering with the home-rule cities and obtaining “nonphysical location” Branch Ids with Colorado State.

The Colorado Department of Revenue (DOR) administers State and State-collected jurisdictions’ sales tax and Retailers Use Tax. The DOR has issued some recent General Information Letters on the subject. The most recent one answers the questions submitted regarding Sales and Income Tax Nexus. Here are the most recent ones:
GIL-17-005 Sales of Mobile Device
Company is doing business in Colorado because it has an employee who is located in Colorado and who solicits sales on behalf of Company. Therefore, Company has an obligation to collect sales or retailer’s use tax depending on where the sale occurs.

GIL-17-009 Retailer’s Use Tax on Leases
Because ownership and possession occur outside of Colorado and Company will be doing business in Colorado when it hires an employee who works in Colorado, Company must collect retailer’s use tax on sales shipped to Colorado once an employee works in Colorado.

GIL-17-015 Independent Contractor Creates Nexus
Company's hiring of independent contractors for maintenance and repair work in Colorado likely creates nexus in Colorado.

For others click:
Audits often result in costly “tuition” assessments that could have been avoided. We’re happy to help.

Alan Smith
Sales Tax Colorado, LLC
Leave a Comment 62 weeks ago

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