Home rule municipalities in Colorado sue state over sales tax exemption law
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Certain services may not be available to attest clients under the rules and regulations of public accounting. As a consolidated city and county, the City and County of Denver is its own county seat. As a consolidated city and county, the City and County of Broomfield is its own county seat. The following table contains the 2020 population of each of the 21 active incorporated municipalities that currently extend into more than one Colorado county. Only 1,969 square miles of Colorado's 103,642 square miles of land area (1.90%) are incorporated in the 272 municipalities.
Several resort communities use the word "village" to describe their central business district. The City of Black Hawk with a 2020 population of 127 is the least populous Colorado city, while the Town of Castle Rock with a 2020 population of 73,158 is the most populous Colorado town. If you are a local government or need information on local governments, please visit ourLocal Government page. The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information.
COLORADO Comparing home rule and statutory municipalities
Colorado statutory towns are similar to villages in other states such as the villages of the State of New York. Colorado has 11 statutory cities that operate under Title 31, Article 1, Section 203 and Article 4, Section 100 or Section 200 of the Colorado Revised Statutes. Statutory cities have an elected mayor and a city council composed of the mayor and two members elected from each ward. A statutory city may petition to reorganize as a Section 200 statutory city with an appointed city manager and a city council with two members elected from each ward and one member elected at large. The mayor may be the city council member elected at large or the city council may appoint a mayor.
Further, towns are allowed additional types of excise taxes, which may include admissions, entertainment, tourism and lodging taxes. 9 Notably, the Model Ordinance defines “economic nexus” as the connection between the municipality and a person not having physical presence in the state. Model Ordinance on Economic Nexus and Marketplace Facilitators, Sec. 3, Colorado Municipal League.
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The home rule cities' new economic nexus standards are not directly tied to the SUTS. Since these cities essentially operate as independent jurisdictions, businesses should be mindful of the specific home rule requirements. A taxpayer operating in a jurisdiction not participating in the SUTS could still have economic nexus with a city and may be required to file a standard return in that city.
Because Colorado is a Home Rule state, the individual Home Rule Cities administer their own sales taxes as well as define their own tax bases. To date there are 70+ Home Rule cities within the state that can basically define their own tax rules. Even more, these rules often differ from other jurisdictions administered by the state. Under Colorado law, municipalities may impose sales and use tax separately from the state's tax.
Home rule in Colorado
Home rule municipalities may either allow the state to collect their local sales tax or elect to self-collect the tax. The approximately 70 self-collecting Colorado municipalities are commonly referred to as home rule municipalities since they all have home rule status with the state. Some of Colorado’s larger home rule municipalities include the cities of Denver, Colorado Springs, Boulder and Aurora.
In some cases, the self-collected municipal sales tax laws differ markedly from the state-administered sales tax law . An interesting development in Colorado is that some municipalities have banded together to form SUTS, the Colorado Sales & Use Tax System. The institution allows sellers to remit sales tax for some home rule municipalities in one online portal. Perhaps recognizing the value of conformity, most participants in SUTS have also chosen to adopt the state’s economic nexus requirements. That is, if a seller hits economic nexus in the state of Colorado, the nexus also applies in the home rule jurisdiction even though the jurisdiction has its own tax code.
Sales Tax
If you also have a retail store in Crested Butte, but ship goods to Denver, and live in Colorado, you now have three separate entities with different sales tax rules and rates. As of yet, there is no single resource for you to file all three of those as one collective return. Please reach out to theCity of Glenwood Springsfor more information regarding their sales/use tax rules and regulations. 55% of home-rule self-collecting municipalities have signed the agreement and are onboarding the system.
Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. The Plaindealer will further explore differences between home rule and statutory municipalities next week and will compare the budgets of Ouray, Ridgway, Paonia and Mancos. In Paonia and Mancos, the town mayors are at the head of the government bodies and are elected to that position. Also elected are six citizens who make up the Board of Trustees, constituting the legislative body of the town. The Board of Trustees hires the town administrator, who serves as the administrative officer of the town under the direction of the board.
Business registration continues to grow, with 1,135 businesses signed up to use the Sales & Use Tax System . Business registration continues to grow, with 1,673 businesses signed up to use the Sales & Use Tax System . Business registration continues to grow, with 2,146 businesses signed up to use the Sales & Use Tax System . Business registration continues to grow, with 3,898 businesses signed up to use the Sales & Use Tax System .
The items taxed and rates used by these municipalities are often distinct from the state. The U.S. State of Colorado has 272 active incorporated municipalities, comprising 197 towns, 73 cities, and two consolidated city and county governments. At the 2020 United States Census, 4,299,942 of the 5,773,714 Colorado residents (74.47%) lived in one of these 272 municipalities. Another 714,417 residents (12.37%) lived in one of the 210 census-designated places, while the remaining 759,355 residents (13.15%) lived in the many rural and mountainous areas of the state.
Even if a self-collected home rule municipality participates in SUTS, taxpayers are not required to use it. A taxpayer may continue filing electronically or on paper, depending on the municipality's requirements. Multi-jurisdiction filers can now file sales tax smarter with all 70 Colorado Home Rule Jurisdictions. A local government’s organizational structure can also differ in home rule and statutory municipalities.
To view the status of a home-rule self-collecting municipality's participation in SUTS, see theReport on Home-Rule Municipalities' Participation in SUTS. If a home rule, self-collected municipality does not participate in SUTS, taxpayers will continue remitting the appropriate sales and use tax directly to the municipality's taxing authority. Contact information for each home rule municipality is available on the CO DOR's website and in the DR 1002 Colorado Sales and Use Tax Rates publication, which is regularly updated. Businesses with more than $100,000 in annual sales into Colorado that do not currently collect taxes for all the home rule, self-collected municipalities must evaluate their obligation to collect additional Colorado municipal sales and use taxes. The following chart indicates which of the 50 U.S. states are home rule states and which states obey the legal principle of Dillon's Rule for determining local government authority. A state in this chart with "Limited" home rule may grant home rule to particular cities and municipalities individually but has no constitutional amendment guaranteeing home rule.
Contact information is available for each home-ruled jurisdiction in the DR 1002 publication. Continued progress on the review, update, and validation of the jurisdictions codes for State administered Tax boundaries. The significant success of SUTS illustrates the collaboration achieved between state government, local jurisdictions, vendors, and the business community. SUTS is a first-of-its-kind software program for the state of Colorado, developed using an Agile methodology. Stakeholders have been engaged throughout the process, from designing the functionality, through procurement, development and ongoing improvements.
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