HB1193 How to Pay Your Use Tax for Internet Purchases

Most of us are accustomed to receiving a Form 1099 every January from our bank or brokerage firm which reports the amount of interest, dividends, etc. which you were paid during the previous calendar year. You also get similar Forms 1099 or 1098 for multiple other purposes, which you may or may not understand.

Starting in January, 2011 you will begin getting a new one. That “Form XYZ” will be coming from many of the Internet retailers such as Amazon, Overstock.com, etc., and catalog companies such as LandsEnd, Orvis and others.

That Form XYZ will report to you the total dollar amount of items purchased from that retailer during the previous calendar year. It will also remind you that you are required to file a Sales and Use Tax Return with the Colorado Department of Revenue. The same Form XYZ will also be sent to the Colorado Department of Revenue. (Yes, most people don’t have any idea what a Sales and Use Tax Return is – that does not matter. It is your responsibility to find out.) It is safe to assume that eventually the Department of Revenue will start to compare the Forms XYZ received against the Sales and Use Tax Returns filed and start sending out bills to those who did not voluntarily pay. Please contact your tax advisor regarding the filing of that return.

In addition to this new Form XYZ, the retailers will be required to send you a separate letter which will remind you that you are required to file a Colorado Sales and Use Tax Return. (Yes, they are required to nag you twice.)

Finally, the Colorado Department of Revenue is granted the authority to establish rules regarding the specifics relating to the Form XYZ. It is possible that they would require the retailer to provide details for every purchase made, such as the date, amount, “category” (whatever that would mean), and whether or not the purchase is exempt from sales tax (which is impossible for the retailer to determine in the case of many consumer sales).

One best believe that Big Brother IS watching, more closely every day!

Keith Crichton MBA, MT, CPA
Crichton Consulting Services, LLC
Centennial