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Alaska & Colorado Implement Centralized Systems for Local Sales Tax Filings
Since the U.S. Supreme Court handed down its decision in Wayfair v. South Dakota in 2018, remote sellers with multistate sales have been tasked with new sales and use tax filing responsibilities. Several states, known as “home rule” states, also have complex local tax systems that require taxpayers to complete filings across many different local jurisdictions. Some home rule states, like Alabama and Louisiana, have already created centralized systems to help simplify this local sales tax filing process.
In 2020, Alaska and Colorado took steps to ease the burden on taxpayers by implementing their own centralized systems for reporting and remitting tax.
Through House Bill 19-1240, Colorado adopted an economic nexus standard effective June 1, 2019. Thus, remote vendors are deemed to be “doing business” in the state and are responsible for collecting and remitting sales taxes if receipts earned from Colorado sales exceed a threshold of $100,000 in the previous or current calendar year.
Compliance with Colorado’s state and local sales tax system can be incredibly complex. The state allows “home rule” municipalities to have the state collect their municipal sales tax, or they can elect to self-collect the tax. Currently, there are 71 self-collecting municipalities throughout the state that adopt, administrate, and enforce their own sales and use tax codes, which can differ substantially from those administered by Colorado at the state level.
In April 2019, Colorado Gov. Jared Polis signed Senate Bill 19-006 calling for the development and implementation of a simplified electronic system for sales and use tax wherein municipalities could accept and process returns. In May 2020, Colorado launched an early version of its Sales & Use Tax System (SUTS), a centralized online filing portal and single point of remittance for all state-collected state and local sales and use taxes, as well as local sales and use taxes for self-collecting municipalities that choose to opt in to the program. The system aims to be a single point of registration and remittance with a unified form and provide address and rate verification, taxability and exemption matrices, and tax rate calculation services.
As of December 11, 2020, 33 of the 71 self-collecting municipalities have opted to participate in the program. Eight additional jurisdictions, including Denver and Arvada, have signed the SUTS agreement and will begin onboarding for the program soon. An up-to-date list of participating jurisdictions can be found through the Colorado Department of Revenue’s municipal portal.
Colorado’s SUTS platform is currently operational for fulfilling sales and use tax obligations, and participating home rule jurisdictions are encouraging taxpayers to begin using this centralized system.
Although Alaska does not impose sales and use tax at a state level, more than 100 local governments throughout the state levy local sales tax. In response to Wayfair, the Alaska Municipal League (AML) is requiring remote sellers and marketplace facilitators to collect and remit sales tax in these local jurisdictions. Collection obligations apply when a threshold of $100,000 in annual gross receipts from sales or 200 transactions in Alaska is reached during the calendar year.
In early 2020, the Alaska Remote Sellers Sales Tax Commission (Commission) approved a uniform Alaska Remote Seller Sales Tax Code (Code), establishing a uniform framework for common rules and definitions, as well as centralized administration for collection and remittance of tax. Participating localities will still be able to adjust their respective tax rates and establish or eliminate tax exemptions.
For remote sellers that handle sales tax compliance manually, conforming to sales tax laws across multiple jurisdictions throughout Alaska is complex and potentially burdensome. As a resolution, the Commission and the AML are working toward a centralized administration system and sales tax compliance software. The software will simplify the reporting and remittance process for remote retailers by allowing them to determine proper rates and rules and complete reporting through an online portal.
Local governments can opt in to the tax collection and remittance system by adopting the Code and passing a model resolution. As of December 11, 2020, 33 jurisdictions have opted to participate. An up-to-date list of participating jurisdictions can be found through the Commission’s portal. When companies register using this system, they are registered for all current participating jurisdictions, as well as any jurisdictions that opt in in the future.
As centralized filing is implemented in Colorado and Alaska, companies can remain compliant with filing requirements by monitoring local economic nexus thresholds, as well as remaining aware of updates to the above-mentioned lists of local jurisdictions that have adopted these systems.
To learn more about these centralized systems or their effect on Alaska and Colorado filings, contact your BKD Trusted Advisor™ or submit the Contact Us form below.