Loading...
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 1 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. 2 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 3 4 5 6 7 8 9 10 11 12