SAGUACHE COUNTY— A small business owner in Crestone is protesting a tax set to go into effect Dec. 1 that he says will effectively make it impossible for small businesses in Colorado to do business in the state without raising costs to consumers substantially.
Tom McCracken and his wife Lillian have operated Green Earth Farms in Saguache County since 1987, selling herbal supplements and produce. The couple operated their farm in Saguache for many years but has now relocated to a farm in Crestone.
Tom McCracken says the new law, described below, will present “an unmanageable paperwork burden” and cost increases for business owners.
The new sales tax is described briefly at Colorado.gov/tax:
“Effective Dec. 1, 2018, the Colorado Department of Revenue will adopt new sales tax rules. The new rules state that sales tax must be collected and remitted based on the jurisdiction’s tax rate at the point of delivery for the taxable good when taxable goods are delivered to a Colorado address outside the retailer’s jurisdiction. This includes any applicable state-administered local and special district taxes.
“For example, if a retailer delivers taxable goods to a customer’s address, sales tax must now be collected at the rate effective for the customer’s address, not the taxes that are in common between the customer’s address and the seller’s location. For a complete list of location/jurisdiction codes for sales tax filing go online to: https://www.colorado.gov/pacific/sites/default/files/DR0800.pdf
“Sales where the customer purchases the taxable good at the seller’s place of business will continue to be taxed at the rate in effect for the retailer’s business location.”
Webinars are offered at the website to help businesses comply with the law. A comment period for business owners expires Nov. 30. The McCrackens submitted the following comments to the state protesting the law.
“Regarding the proposed changes to the sales tax rules that will require small businesses such as ours to pay sales tax in each jurisdiction in which we make a sale, I am extremely opposed to the changes for the following reasons:
“1) Unmanageable burden of paperwork. Our internet shopping cart provider has said they will be able to calculate the local tax that should be collected in each location. I am skeptical, but even if they are able to do so, they will need to make a report available that sorts out the in-state sales and lists each sale by location along with the tax collected. If they cannot collect the various taxes at the time of sale we will have to block all Colorado sales or find a provider that can. Once the report is downloaded, each location and tax district will need to be entered manually into the DOR website when filing.
“Our business is operated by just my wife and I. We are already maxed out on time. If I had to hire a bookkeeper to do this paperwork my estimate is that each transaction would cost approx. $10 to bookkeep. Our average sale is perhaps $50, This represents a 20 percent increase in our “costs which make doing business in Colorado not cost-effective. If we attempt to pass this cost on to the consumer, sales will no doubt decrease, leading to an overall reduction in commerce, which will translate into less state sales tax collected overall. Not to mention the damage to our income source.
“2) The cost to collect and pay the tax is more than the tax itself in many cases. This law makes no sense and will further debilitate small business at a time when mega corporations are dominating the market. The state should be looking for ways to encourage small business, especially those that operate in low income rural areas such as ours. We depend on internet sales to survive as we are far from populated areas.
“3) The cost to enforce such a law is prohibitive. If the state decides to audit a small business, it will cost far more to do so than what tax will end up being collected. This law will create a whole new level of bureaucracy that we taxpayers cannot afford. The whole idea is self-defeating.
“I understand the need for municipalities to collect sales taxes at a time when many more people are using the internet to shop. So here are my proposed solutions:
• It is obviously less expensive for a consumer to order by mail than to travel to a remote location to make a purchase, but there is no difference to the vendor. The product is still manufactured and sold at the vendor’s location. So just eliminate the exemption for internet sales outside our jurisdiction. I would be happy to charge and collect sales tax in my jurisdiction. This would eliminate all the extra paperwork involved in the proposed law.
“My numbers would change but the amount of paperwork involved would be the same. Local governments would see the increase in revenue. This solution would encourage local governments to promote small business growth in their area. I do not see a downside to this solution.
• But if for some reason that can’t work, what about a flat internet sales tax that would be a one-line entry on a tax return. The state would collect it and decide how to divvy up the proceeds based on population density or whatever criteria might be applicable.
“The state should not promulgate laws that suppress or eliminate commerce. Especially laws that hurt small business in areas of the state that sorely need economic activity. The proposed law puts our business at great risk of failure. Please reconsider.”