I spent the better part of today taking a Sales Tax Law class. I found out about it late yesterday. I got out of bed at the crack of dawn and drove to Denver in the rain and traffic. I have the name tag and little pen with Colorado Department of Revenue on it to prove it.
It turns out that
(1) you actually do have to pay taxes if you want to run your own business. I was pretty sure about this, but was hoping there was a loophole I was missing.
And (2) Colorado tax law is the most complicated tax law in the entire country.
I just moved here from a state where the gross receipts tax form has ONE line you have to fill out with a total of 5 boxes. Seriously. This might be the source of my disillusionment.
I hung in there really well. I followed the presentation, I made notes on the Powerpoint handout on the little lines next to the little boxes. I squinted at the text that was too small for 42-year-old eyes to make out in the dim light of the projector, and I put my hand up unashamedly and asked a lot of questions that might have been stupid. But I am pretty sure no one else had any idea either that in the state of Colorado you are supposed to voluntarily pay what is called a Consumer Use Tax. That means when you buy something from out of state but you are going to use it in your home state of Colorado, you have to report that you bought it and pay the 2.9% sales tax that rightfully belongs to the State of Colorado because you are USING it here. I really really wanted to raise my hand with fingers wiggling and ask if ANYONE does this. I just bought a book for my niece on Amazon. Yep. Subject to Consumer Use Tax. I didn't ask. I was afraid I'd get audited immediately.
I have a hugely inflated respect for my sister today. She has successfully run a small business in Colorado for many years now and she figured this all out on her own. She rocks. Maybe if I bring her wine and cheese and free babysitting she'll decode some of it for me. I was pretty proud of myself for figuring out all of this in New Mexico. I had NO idea what kind of abuse Colorado could deliver. New Mexico is child's play compared to the Colorado tax code.
The main presenter today was a bad-ass woman named Ruth. She knew her stuff and what is more, she knew how to teach adults. She was a shining example of how to help people understand difficult things. It fell apart about halfway through when the rules just seemed too ridiculous to possibly be true. (Or perhaps my first class American University Graduate-Level Education was not good enough to comprehend the taxy-vocabularium that is the tax code--your call.) She brought in a tax examiner for the last hour of the day.
Here is a small sample of my experience with him:
Student Frank* who is starting a business selling wool children's clothing mostly online: So if I am selling a product to someone in Denver from my store in Bayfield, all I have to worry about is the state sales tax? I don't have to pay county or city tax?
Tax Examiner: That depends. [He said this in answer to every question.] There are the jurisdictions to consider: state, county, city, and special districts. Do you have the current DR1002? Make sure you check the scientific districts for Denver, both RTD and RTA and which county exactly are you sending the item to because it might not be Denver county and other counties have different laws. CDOR doesn't deal with the taxes due to Denver county, so you'll have to contact them about that. Also Denver is a Home Rule city and that makes a difference. Do you know if Bayfield is Home Rule also? Make sure you fill out a HD987-6372 C and file that BEFORE you get to your DR1002 and don't forget the consumer use tax which is also necessary in this case. Is it an event, because you'll need a special event license before selling there. And what it all comes down to is what are your involved jurisdictions. Remember, it is your fiduciary and statutory responsibility to pay your state taxes.
Student Ed who currently runs a service-based business doing commercial glass etching but wants to start selling products: [Sighs, looks at his hands, shifts in his seat, whimpers]
Student Ed: [Clears throat and raises his hand] Is there anyone who, um, could help us do this if, um, we aren't quite understanding how it all works right this moment? You know, just until we get up to speed?
Tax Examiner: That would be an accountant.
No one else asked any more questions. We were too flummoxed.
Without any more research I think I can safely say that being an accountant in Colorado is a lucrative profession.
I hope that I can make it through a tax cycle eventually without crying. Perhaps the one right after I find a good accountant.
_________________________
*The names of the students have been changed to protect the confused tax-payer who may well not get all of this right for his first 300 filings. I'm sure 301 will be perfect. I know mine will.
It turns out that
(1) you actually do have to pay taxes if you want to run your own business. I was pretty sure about this, but was hoping there was a loophole I was missing.
And (2) Colorado tax law is the most complicated tax law in the entire country.
I just moved here from a state where the gross receipts tax form has ONE line you have to fill out with a total of 5 boxes. Seriously. This might be the source of my disillusionment.
I hung in there really well. I followed the presentation, I made notes on the Powerpoint handout on the little lines next to the little boxes. I squinted at the text that was too small for 42-year-old eyes to make out in the dim light of the projector, and I put my hand up unashamedly and asked a lot of questions that might have been stupid. But I am pretty sure no one else had any idea either that in the state of Colorado you are supposed to voluntarily pay what is called a Consumer Use Tax. That means when you buy something from out of state but you are going to use it in your home state of Colorado, you have to report that you bought it and pay the 2.9% sales tax that rightfully belongs to the State of Colorado because you are USING it here. I really really wanted to raise my hand with fingers wiggling and ask if ANYONE does this. I just bought a book for my niece on Amazon. Yep. Subject to Consumer Use Tax. I didn't ask. I was afraid I'd get audited immediately.
I have a hugely inflated respect for my sister today. She has successfully run a small business in Colorado for many years now and she figured this all out on her own. She rocks. Maybe if I bring her wine and cheese and free babysitting she'll decode some of it for me. I was pretty proud of myself for figuring out all of this in New Mexico. I had NO idea what kind of abuse Colorado could deliver. New Mexico is child's play compared to the Colorado tax code.
The main presenter today was a bad-ass woman named Ruth. She knew her stuff and what is more, she knew how to teach adults. She was a shining example of how to help people understand difficult things. It fell apart about halfway through when the rules just seemed too ridiculous to possibly be true. (Or perhaps my first class American University Graduate-Level Education was not good enough to comprehend the taxy-vocabularium that is the tax code--your call.) She brought in a tax examiner for the last hour of the day.
Here is a small sample of my experience with him:
Student Frank* who is starting a business selling wool children's clothing mostly online: So if I am selling a product to someone in Denver from my store in Bayfield, all I have to worry about is the state sales tax? I don't have to pay county or city tax?
Tax Examiner: That depends. [He said this in answer to every question.] There are the jurisdictions to consider: state, county, city, and special districts. Do you have the current DR1002? Make sure you check the scientific districts for Denver, both RTD and RTA and which county exactly are you sending the item to because it might not be Denver county and other counties have different laws. CDOR doesn't deal with the taxes due to Denver county, so you'll have to contact them about that. Also Denver is a Home Rule city and that makes a difference. Do you know if Bayfield is Home Rule also? Make sure you fill out a HD987-6372 C and file that BEFORE you get to your DR1002 and don't forget the consumer use tax which is also necessary in this case. Is it an event, because you'll need a special event license before selling there. And what it all comes down to is what are your involved jurisdictions. Remember, it is your fiduciary and statutory responsibility to pay your state taxes.
Student Ed who currently runs a service-based business doing commercial glass etching but wants to start selling products: [Sighs, looks at his hands, shifts in his seat, whimpers]
Student Ed: [Clears throat and raises his hand] Is there anyone who, um, could help us do this if, um, we aren't quite understanding how it all works right this moment? You know, just until we get up to speed?
Tax Examiner: That would be an accountant.
No one else asked any more questions. We were too flummoxed.
Without any more research I think I can safely say that being an accountant in Colorado is a lucrative profession.
I hope that I can make it through a tax cycle eventually without crying. Perhaps the one right after I find a good accountant.
_________________________
*The names of the students have been changed to protect the confused tax-payer who may well not get all of this right for his first 300 filings. I'm sure 301 will be perfect. I know mine will.