So once again the State of Colorado has decided to try and drive most online businesses out of business. Is it purposeful hatred of online companies? Or is the state government just stupid?
To pick a couple of quotes from the Denver Post article on this (very well written):
When all of Colorado’s 344 cities, counties and special taxing entities like RTD are layered over one another, there are 683 possible sales tax combinations in the state.
And it doesn’t stop there. They each have their own rules as to what is taxed, and at what rate. In our case I finally had the State Department of Revenue tell us they couldn’t tell us if the annual maintenance we sell is taxable, so they told us to decide if it was taxable and then if they disagreed, they would sue us (yes really!).
Out-of-state companies and in-state competitors will no longer have an advantage over local companies when selling similar products because they will all be adding the same taxes.
But local brick & mortar stores have a giant advantage here – they collect tax for the jurisdiction they are located in, not for 683 different jurisdictions. And 683 different categorization criteria.
He believes filing monthly returns will be his third-largest business expense next year, behind raw materials and contractors. He has already informed his online and social media contractor he won’t be able to afford her services after Jan. 1.
So it’s already killing jobs. And it shows the state’s clear animus toward online business in the state when they are imposing what will become the third largest cost on companies.
At my company we’re about to release a new online store and a new pricing model where we charge by the month for a much lower amount. The charge is for per use of our software and support so we would be facing deciding if we should charge tax, based on what category or service, and then wait to get sued by 683 jurisdictions.
So we’ll go with the easier solution – we just won’t sell to people in the State of Colorado (except for large corporate purchases where it’s worth the hassle).
Ah… the joys of doing business in a state that is trying to drive you out of business. Or at least out of the state.
And kudos to Tracy Kraft-Tharp who appears to be one of the few that understands the scope of the problem. Hopefully she’ll get us to a point where there’s a single place to report any pay the proceeds and a single taxing authority who will provide a definitive answer as to if something is taxable, and if so, in what category (rate). (A single rate is nice, but not that big a deal as there are services to provide the rate info. It’s the categorization that’s killer. And having to make payments to 73 distinct entities is expensive.)