First Regular Session Sixty-ninth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 13-0978.02 Esther van Mourik x4215HOUSE BILL 13-1312 HOUSE SPONSORSHIP Williams, SENATE SPONSORSHIP Steadman, House Committees Senate Committees Finance A BILL FOR AN ACT Concerning the circumstances under which a person who sells items subject to sales tax must collect such sales tax on behalf of the state. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The state imposes a sales tax collection obligation on every retailer or vendor, and the terms "retailer" and "vendor" are defined to include every person doing business in this state and selling to the user or consumer, and not for resale. The state also imposes a use tax collection obligation on every retailer doing business in this state and making sales of tangible personal property for storage, use, or consumption in the state. The sales and use tax nexus provisions are contained in the definition of the term "doing business in this state". The bill modifies and expands the state's sales and use tax nexus provisions by: Expanding the types of activities that will create nexus with the state if conducted by any person that already has substantial nexus with this state, other than a common carrier acting in its capacity as such, pursuant to an agreement or arrangement with an out-of-state retailer; Clarifying that the expanded nexus provisions create a rebuttable presumption that the specified activities create substantial nexus for the out-of-state retailer; Requiring legislative approval of any agreement, executive order, or contract by the state that relieves an out-of-state retailer of its obligation to collect sales and use tax even if the retailer or an affiliated person has substantial nexus; Requiring an out-of-state retailer to collect and remit sales and use taxes if that retailer contracts with the state for the sale of tangible personal property or taxable services; Limiting the effect of the expanded nexus provisions to sales and use tax by specifying that the nexus does not apply to franchise, income, or other taxes; and For local sales or use taxes, requiring the attributed activity creating the nexus for the out-of-state retailer to occur in the boundaries of the local taxing jurisdiction. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, 39-26-102, amend (3) as follows: 39-26-102. Definitions. As used in this article, unless the context otherwise requires: (3) (a) "Doing business in this state" means the selling, leasing, or delivering in this state, or any activity in this state in connection with the selling, leasing, or delivering in this state, of tangible personal property or taxable services by a retail sale as defined in this section, for use, storage, distribution, or consumption within this state. This term includes, but shall not be limited to, the following acts or methods of transacting business: (a) (I) The maintaining regular and continuous use within this state directly or indirectly or by a subsidiary, of an office, distributing house, salesroom or house, salesroom, warehouse, or other place of business owned or operated by any person other than a common carrier acting in its capacity as such; and (b) (I) (II) The soliciting, either by direct representatives, indirect representatives, or manufacturers' agents or by distribution of catalogues or other advertising, or by use of any communication media, or by use of the newspaper, radio, or television advertising media, or by any other means whatsoever, within the state of business from persons residing in this state and by reason thereof receiving orders from, or selling or leasing tangible personal property or selling taxable services to, such persons residing in this state for use, consumption, distribution, and storage for use or consumption in this state. (II) (b) (I) Commencing March 1, 2010, if a retailer that does not collect Colorado sales tax If a retailer has substantial nexus with this state, and such retailer is part of a controlled group of corporations, and that controlled group has a component member that is a retailer with physical presence in this state, the retailer that does not collect Colorado sales tax is then a component member of the controlled group of corporations that sells, leases, or delivers tangible personal property or taxable services is presumed to be doing business in this state. This presumption may be rebutted by proof that during the calendar year in question, the component member that is a retailer with substantial nexus with this state did not engage in any constitutionally sufficient solicitation or other activities to establish or maintain a market in this state on behalf of the retailer that is presumed to be doing business in this state. (II) For purposes of this subparagraph (II) paragraph (b): (A) "Controlled group of corporations" has the same meaning as set forth in section 1563 (a) of the federal "Internal Revenue Code of 1986", as amended, and "component member" has the same meaning as set forth in section 1563 (b) of the federal "Internal Revenue Code of 1986", as amended. This presumption may be rebutted by proof that during the calendar year in question, the component member that is a retailer with physical presence in this state did not engage in any constitutionally sufficient solicitation in this state on behalf of the retailer that does not collect Colorado sales tax. (B) "Controlled group of corporations" and "component member" also include any entity that, notwithstanding its form of organization, bears the same ownership relationship to the retailer as a corporation that would qualify as a "component member" of the same "controlled group of corporations" as the retailer. (c) (I) A person selling, leasing, or delivering tangible personal property or taxable services is presumed to be doing business in this state if such person enters into an agreement or arrangement with another person with substantial nexus with this state, other than a person acting in its capacity as a common carrier, for that other person with substantial nexus to: (A) Sell tangible personal property or taxable services similar to that sold by the person presumed to be doing business in this state, and to do so under the same or a similar business name; (B) Maintain an office, distribution facility, warehouse, storage place, or similar place of business in this state to facilitate the delivery of tangible personal property or taxable services sold by the person presumed to be doing business in this state to the customers of the person presumed to be doing business in this state; (C) Use trademarks, service marks, or trade names in this state that are the same or substantially similar to those used by the person presumed to be doing business in this state; (D) Deliver, install, assemble, or perform maintenance services in this state for tangible personal property sold to customers residing in this state by persons presumed to be doing business in this state; (E) Facilitate the delivery of tangible personal property to in-state customers of the person presumed to be doing business in this state by allowing such customers to pick up tangible personal property sold by the person presumed to be doing business in this state at an office, distribution facility, warehouse, storage place, or similar place of business maintained in this state; or (F) Conduct any other activities in this state that are significantly associated with the ability of the person presumed to be doing business in this state to establish and maintain a market in this state for sales of tangible personal property or taxable services. (II) The presumptions set forth in subparagraph (I) of this paragraph (c) may be rebutted by demonstrating that the activities conducted in this state are protected by the United States constitution or are not significantly associated with the ability of the person presumed to be doing business in this state to establish or maintain a market in this state for such person's sales of tangible personal property or taxable services. (d) A person described in paragraph (a), (b), or (c) of this subsection (3) may not be required to collect sales or use taxes imposed by a local taxing jurisdiction, including a local taxing jurisdiction governed by a home rule charter, unless the activities described in paragraph (a), (b), or (c) occur within the boundaries of such local taxing jurisdiction. The provisions of this subsection (3) do not affect the imposition or sourcing of sales or use taxes on intrastate sales. (e) This subsection (3) affects the imposition, application, or collection of sales or use taxes only. SECTION 2. In Colorado Revised Statutes, 39-26-103, add (3.5) as follows: 39-26-103. Licenses - fee - revocation. (3.5) A person may only sell, lease, or deliver tangible personal property or taxable services to the state, either through the "Procurement Code", articles 101 to 112 of title 24, C.R.S., or otherwise, if such person, or any component member of a controlled group of corporations as defined in section 39-26-102 (3) (b) (II) that includes that person, obtains a retail sales tax license as specified in this section, and such person is responsible for the collection of sales taxes on all its sales, leases, or deliveries of tangible personal property or taxable services in this state as specified in section 39-26-105. SECTION 3. In Colorado Revised Statutes, add 39-26-104.5 as follows: 39-26-104.5. Decisions to release a retailer from collecting sales tax. Any agreement, executive order, or contract, whether written or oral, express or implied, between a person and the state that releases a person from the requirement to collect state-administered sales and use tax in this state despite the person's substantial nexus with this state is null and void unless such agreement, executive order, or contract is specifically approved by the general assembly acting by bill. SECTION 4. Severability. If any provision of this act or the application thereof to any person or circumstance is held invalid, such invalidity does not affect other provisions or applications of the act that can be given effect without the invalid provision or application, and to this end the provisions of this act are declared to be severable. SECTION 5. Effective date. This act takes effect July 1, 2013. SECTION 6. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.