Simplifying Colorado’s Sales Tax System — One Success at a Time

Just a few short years ago, Colorado received a “D” rating from the Council on State Taxation, ranking Colorado’s sales tax system as one of the worst in the country. The abysmal rankings are a result of a confusing and cumbersome patchwork of 756 geographic areas with different sales tax rates and bases, and 72 home rule cities that require businesses to individually register and remit sales tax. This complicated and challenging sales tax system puts a significant burden on businesses around the state. 

In 2015, the Coalition to Simplify Colorado Sales Tax was founded by a non-partisan and diverse group of business and community leaders to address these challenges with one mission in mind — to simplify Colorado’s sales tax system. 

READ: Stay Ahead of Changes to the Tax Treatment of R&E Expenditures

This is not an issue that lands in news headlines very often. It is, however, critical to businesses and cities across Colorado and to our state government. Simplifying Colorado’s sales tax system will result in a thriving business climate, more jobs and an economy that is flourishing. This is an ongoing challenge, but we have come a long way since Colorado received that less-than-passing grade from the Council on State Taxation.

Working hand-and-hand with the General Assembly’s bipartisan Sales and Use Tax Simplification Task Force, the Simplify coalition has achieved tremendous success. One of the most substantial achievements has been the creation of SUTS, a one-stop portal designed to facilitate licensing and the collection and remittance of sales and use tax. SUTS will ultimately remove a significant amount of red tape and paperwork for businesses, untangle the more than 700 sales tax jurisdictions, and free up time to do what businesses do best — grow our economy.

READ: Higher Costs, Higher Crime, and More Red Tape — How Government Interference May Be Hurting Coloradans’ Wallets

SUTS is a remarkable tool for our small businesses and taxing districts. But it will soon be even better since House Bill 23-1017 passed in the most recent legislative session. The measure requires modifications that improve ease of use for businesses and municipalities remitting sales tax. The bill also requires the Department of Revenue to increase the awareness and participation of SUTS.

Another success of the 2023 legislative session is the passage of Senate Joint Resolution 23-004, which creates a process to achieve uniformity in the collection of sales and use tax for construction materials among municipalities, also improving Colorado’s business environment.

And one piece of legislation that has received some media attention and that the coalition fully supports is Senate Bill 23-143, which lends additional flexibility to the Colorado business community. Since it was made effective July 1^st, 2022, the retail delivery fee has raised significant concerns with many Colorado businesses, particularly the costs of compliance and implementation of the fee. Signed by Governor Polis a few weeks ago, SB23-143 helps to alleviate some of those concerns by simplifying the fee collection and remittance process and providing an exemption for our state’s smaller businesses.

In light of the work of the coalition and the legislation that has passed, Colorado has climbed 18 spots — from 39^th to 21^st of states since 2017 — on the sales tax component in the Tax Foundation’s 2023 State Business Tax Climate Index. But there is still much work to be done continuing to simplify sales tax administration and address Colorado’s highly complex construction use tax and its equally complex lodging tax.

Paul Archer is the president of the Simplify Colorado Sales Tax coalition and founder/CEO of Automated Business Technologies.