HomeMy WebLinkAbout2020-33 IGA with Colorado Department of Revenue regarding Sales and use Tax Software__________________________________________________________________________
Memorandum
TO: Town Council
FROM: Finance Department
DATE: August 4, 2020
SUBJECT: Colorado State Sales and Use Tax Software (SUTS) System
I. SUMMARY
The purpose of this memorandum is to provide an overview of the SUTS system created by
the State of Colorado to further streamline and simplify sales tax collections in the State.
Resolution 33, series of 2020, authorizes the Town to enter an intergovernmental agreement
with the State to utilize this new system for collection of sales tax from remote vendors.
Separately, Town Council will be asked to approved Ordinance 9, series of 2020 in the
evening meeting. This ordinance provides necessary amendments to the Town of Vail sales
tax code in order to utilize the system.
II. BACKGROUND
Collection of sales taxes across different home rule municipalities in the State of Colorado is
highly complex and burdensome for the business community. After the 2018 Supreme Court
decision in South Dakota v. Wayfair, Inc, Colorado began the legal process of complying with
the ruling’s requirements for destination based sales and use tax collections which became
effective May 2019. Destination based sales tax requires businesses to collect, and remit
sales tax based on the location of the consumer when taxable goods are delivered to a
Colorado address. Pursuant to the ruling requirement that tax collections not be overly
burdensome, the Colorado State Senate adopted SB 19-006 in April 2019 appropriating
funds for the development of a sales and use tax simplification software. The developed
system offers multiple tools to streamline the tax collection process for remote sellers;
Single point of remittance for all participating jurisdictions
Sales and use tax rate lookup by address for the entire state
Ability to remit sales tax to multiple jurisdictions with a single payment
The State Senate indicated in SB 19-006 that all home rule municipalities should voluntarily
participate in the SUTS system within 3 years of its implementation. Town of Vail staff met
with the State individually and attended stakeholder meetings in developing the proposed
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agreement. The new centralized system, created by MUNIRevs, began accepting tax
payments in May of 2020. The Town of Vail currently uses MUNIRevs software to collect our
4% local sales tax which will provide a seamless data transfer of tax return information and
electronic transfer of funds directly to town accounts.
III. DISCUSSION
As a part of setting up centralized sales tax collections for remote vendors, adoption of
Ordinance No. 9, Series 2020 will update the town code and modify certain standard
definitions allowing the town to use the sales tax simplification software. Remote sellers
located outside of Vail would then have the option to file Town of Vail sales taxes through the
State’s SUTS system rather than with the Town. Funds collected by the State would be
transferred to the Town daily. Businesses located within the Town would still be required
to maintain a local business license and file directly with the Town .
The new definition of marketplace facilitator and additional regulations for marketplace sales
have been recommended by the CML to reduce the variation in local taxation in the State.
Maintaining uniform tax definitions among both self-collecting municipalities and state-
collected municipalities insulates all parties against potential legal challenges to mandatory
remote sales tax collections. This is a substantial change to Town tax policy as we currently
require individual marketplace vendors to collect and self-remit sales taxes. This applies to
third party sales made via websites like eBay or Amazon. Notably, this also includes short-
term rental (STR) owners using websites like Airbnb or VRBO. Under the new ordinance,
these owners would no longer be required to maintain a sales tax license if they exclusively
book their property through a bona fide marketplace facilitator. Staff anticipates that this will
increase sales tax collections and compliance from short-term rentals significantly. STR
owners and managers will still be required to obtain a STR Registration and would be subject
to audit for any past-due tax liability incurred prior to the rule change.
Adoption of the SUTS system will also help the Town to reinforce sales tax collections from a
larger portion of remote vendors with the addition of a new definition of Economic Nexus. The
new definition is linked to Colorado State law C.R.S. § 39-26-102(3)(c). Currently Colorado
businesses with less than $100,000 in annual sales are exempt from destination based sales
tax collections. The State has indicated that once a majority of jurisdictions have agreed to
use the SUTS system, this threshold will be removed, and all remote sellers will be required
to file sales taxes based on destination.
IV. ACTION REQUESTED FROM COUNCIL
During tonight’s evening meeting, Council will be asked to approve the first reading of
Ordinance No. 9, Series 2020 and Resolution No. 33, Series 2020. Staff recommends Town
Council approve or approve with amendments the first reading of Ordinance No. 9, Series
2020 and Resolution No. 33, Series 2020.
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Resolution N . 33, Series of 2020
RESOLUTION NO. 33
SERIES 2020
A RESOLUTION OF THE VAIL TOWN COUNCIL AUTHORIZING THE
TOWN MANAGER TO ENTER INTO AN INTERGOVERNMENTAL
AGREEMENT WITH THE COLORADO DEPARTMENT OF REVENUE
REGARDING SALES AND USE TAX SOFTWARE
WHEREAS, pursuant to Article XIV, Section 18, of the Colorado Constitution and
C.R.S. § 29-1-203, governments may cooperate or contract with one another to provide
any function, service, or facility lawfully authorized to each;
WHEREAS, pursuant to Senate Bill 19-006, the Colorado Department of Revenue
contracted with vendors to provide a sales and use tax simplification system that allows
taxpayers to look up and remit sales and use taxes through a single portal managed by
vendors and held in trust for the benefit of local taxing jurisdictions ("SUTS"); and
WHEREAS, the Town wishes to participate in SUTS by intergovernmental
agreement.
NOW THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE
TOWN OF VAIL:
Section 1. The Agreement Regarding Department of Revenue Sales and Use
Tax Software is hereby approved in substantially the form attached hereto, subject to final
approval by the Town Attorney. Upon such approval, the Town Manager is authorized to
enter into the Intergovernmental Agreement on behalf of the Town.
INTRODUCED, READ, APPROVED AND ADOPTED THIS 4 DAY OF
AUGUST 2020.
______________________________
Dave Chapin, Mayor
ATTEST:
____________________________
Tammy Nagel, Town Clerk
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