New Tax Reporting Requirements Effective July 1, 2017
If you have customers in Colorado, Louisiana, or Vermont, you may be subject to new tax notification and/or reporting requirements effective July 1, 2017. These requirements are intended to make it easier for the states to collect use tax from their residents.
Out-of-state retailers with at least $100,000 in gross sales to Colorado customers during the previous calendar year who don’t collect and remit Colorado sales tax are now subject to the following requirements:
- At the time of sale, they must notify Colorado customers of their obligations to self-report and pay use tax to the Colorado Department of Revenue (“DOR”).
- They must provide each Colorado customer who spends more than $500 with the retailer during the year with an annual report detailing the customers’ purchases during the preceding calendar year and a notice regarding the customers’ reporting and payment obligations.
- They will be required to provide the Colorado DOR with an annual report that includes the names and amount of total purchases of Colorado customers.
The first annual reports are due early in 2018: January 31 to the customers and March 1 to the state. While the notices are only required to include activity beginning July 1, retailers are encouraged to include all 2017 transactions.
Out-of-state retailers that have cumulative Louisiana sales in excess of $50,000 per calendar year and who don’t collect and remit Louisiana sales tax will be subject to new notification and reporting requirements. In determining whether the reporting threshold is met, companies must include sales by affiliates, which are companies that are in a similar line of business or sell similar products.
There are three parts to the new law:
- At the time of sale, the remote retailer must notify the purchaser that the purchase is subject to use tax unless specifically exempt. The notification must state that there is no exemption for making the purchase over the Internet, through a catalog, or by other remote means. The statement must also indicate that Louisiana law requires use tax to be paid annually on the individual’s income tax return or by other means.
- A remote retailer must send an annual notice to a Louisiana purchaser containing the amount paid for purchases during the preceding calendar year by January 31 of each year. The remote retailer’s notice must contain the name of the retailer, a list of dates and amounts of purchases, whether the purchase is exempt (if known), and a statement indicating that Louisiana law requires use tax to be paid annually on the individual’s income tax return or by other means. Just like Colorado, the requirement is for retailers to report purchases starting July 1. However, they’re encouraged to report all of 2017.
- By March 1 of each year, the remote retailer must file an annual statement with the Louisiana Department of Revenue that includes the total amount paid by the purchaser in the past calendar year. It may not contain any other details as to the specific property and services purchased.
Vermont now imposes a use tax notification responsibility on non-collecting vendors, regardless of the volume of their sales to Vermont customers. Non-collecting vendors are generally defined as vendors who make taxable sales to Vermont purchasers but are not responsible for collecting sales tax. The new law requires non-collecting vendors to notify their Vermont purchasers that sales or use tax is due and is required to be paid on the purchasers’ tax returns. The notification must state that failure to report eligible purchases may result in a $5 penalty for each instance of non-compliance.
A non-collecting vendor must also send an annual notification to each Vermont purchaser who has made $500 or more in purchases from the vendor during the previous calendar year. The notification must include the total amount paid by the purchaser and a notice stating Vermont requires the reporting and payment of sales or use tax on nonexempt purchases. A $10 penalty may be imposed on the non-collecting vendor for each instance of non-compliance with the notification requirements.
The deadlines for reporting sales to Vermont customers are the same as for Colorado and Louisiana. Purchasers should receive their report by January 31, 2018. While the report has to include all purchases since July 1, 2017, retailers are encouraged to include purchases for all of 2017. The report to the state is due by March 1, 2018.
As discussed in “Sales and Use Tax, Technology and the Evolving Definition of Sales Tax Nexus,” the rules regarding sales tax nexus and reporting obligations imposed on out-of-state vendors have changed substantially over the last several years. Staying abreast of these changing rules poses a logistical challenge.
If you have any questions about your sales and use tax obligations, reach out to William Poad, Director, or reach out to Kathleen Holston, CPA, CMI, Senior Manager, with the Cherry Bekaert Sales and Local Tax (“SALT”) team to start the conversation. If you’re concerned about not having properly filed in all the states where you’ve had nexus in the past, the SALT group may be able to help. Let our team reach out to the proper taxing authorities to negotiate on your behalf, which can lead to substantial savings.
Our SALT team can also work in conjunction with our Technology Solutions team to help you find a better technology solution to collecting, tracking, reporting, and paying sales taxes across multiple jurisdictions – something that can integrate with your current systems.