Colorado’s sales and use tax regulations landscape is undergoing significant shifts, mainly concerning economic nexus provisions and the role of home rule municipalities. Colorado state and local sales taxes, the implementation of sales and use tax simplification programs, and the response of self-collecting home rule municipalities, particularly in light of the Colorado Municipal League’s Model Ordinance on Economic Nexus and Marketplace Facilitators.

In Colorado, municipalities can adopt “home rule” status, granting them autonomy in local and municipal matters, including sales tax regulations. Approximately 70 municipalities in Colorado have chosen self-collection of sales tax, known as home rule municipalities, such as Denver, Colorado Springs, Boulder, and Aurora.                                                                                                                                                                                                                                                                                                                                             These self-collecting home rule municipalities operate as independent taxing authorities, responsible for establishing and administering their sales and use tax codes. This autonomy allows them to customize their tax bases, which may differ from the state’s tax base.

In response to the Wayfair decision, Colorado swiftly enacted legislation establishing an economic nexus standard for sales and use tax purposes. Effective June 1, 2019, remote sellers with annual sales exceeding $100,000 must collect state sales tax. This threshold also applies to marketplace facilitators, effective October 1, 2019. These regulations superseded previous economic nexus regulations the
CML Model Ordinance and Home Rule Municipality Response

The Colorado Municipal League (CML) introduced the Model Ordinance on Economic Nexus and Marketplace Facilitators, guiding self-collecting home rule municipalities to impose local sales tax collection duties on remote sellers and marketplace facilitators, meeting the $100,000 sales threshold. Several Colorado municipalities have begun enforcing economic nexus standards using this model ordinance, often without formal public notice.

Implementing economic nexus standards and adopting the CML Model Ordinance reflects Colorado’s efforts to adapt its sales tax regulations to the evolving e-commerce landscape. However, the enforcement actions by some municipalities raise questions about transparency and public notification.

In conclusion, navigating Colorado’s evolving sales tax landscape requires a thorough understanding of state laws, local ordinances, and the implications of economic nexus provisions, particularly for businesses operating across multiple jurisdictions within the state.

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