Sales Tax Conundrum for Customers in Colorado and Kansas
Now for the yucky sales tax talk.
U.S Sales taxes have always been based on point of delivery instead of point of sale. The 2018 South Dakota vs Wayfair U.S. Supreme Court decision opened up a Pandora’s Box of issues for small businesses due to the point of delivery piece of the puzzle. Large companies like Amazon, Walmart, and Target have the resources necessary for compliance so they don’t have much to worry about. Unfortunately, smaller businesses like mine don’t have the same resources which means limiting our customer bases or going out of business altogether. Great for Amazon, bad for us. For now my biggest obstacles are in Colorado and Kansas, but I may have to stop selling in other states if any decide to change their nexus laws to match. Please read below for details about each state currently affected.
Colorado Sales Tax
Colorado is a home rule state which means many city, county, and special districts collect their taxes separately including separate paperwork, licensing, and filing. Some cities, districts and counties overlap with others which makes tax compliance based on point of delivery extremely complicated and time consuming without the aid of a tax service or accountant. Since I can’t afford the cost of assistance, I would need to learn the tax code for literally every city, county and special district in the state, register my business with each of them and pay each one individually every month. I was hoping since we are a home rule state, the new nexus laws would apply to in state businesses as well, but this is unfortunately not the case.
If you live in Colorado, please call your representative and request that in state sellers be included in the nexus laws applied to out of state sellers. That way we would continue to pay our local tax until we meet the legal nexus requirement out of state companies have. This would allow small businesses like mine to sell in Colorado without having to worry about licensing, and complying with every home rule city, county and special district rule in the state.
So for the time being I can only ship to customers with a delivery address in the Westminster/Jefferson County tax district. The sales tax for all of my Colorado customers will still be 8.35%, but anyone outside Westminster/Jeffco will need to pick up their items here or hire a delivery service to pick up and deliver on their own.
Kansas Sales Tax
Did you know that Kansas is the only state in the union refusing nexus style regulations!
I know, it’s crazy, but any items sold in or shipped to Kansas require a sales license and payment of state sales taxes even if it is only $.10. WOW!
For perspective, all other states in the union have “nexus” laws which help determine which businesses are required to pay sales taxes and which aren’t. Simply put if you are a tiny online crafter like myself you aren’t considered large enough to warrant adherence to the local sales tax laws. For example, most states consider $100,000 to $200,000 in annual sales or 200 transactions annually enough to qualify for a nexus status significant enough to require licensing and the payment of sales taxes.
So I find myself in a bit of a pickle. For now, until further notice, all orders to be shipped to Kansas must go through my Etsy Store (https://www.etsy.com/shop/RosaryStuff). Etsy has the resources to charge and pay the appropriate taxes for all of my Kansas customers. You don’t have to be a member of Etsy to shop there, so if you have any questions or need help please don’t hesitate to let me know.
Please Contact Your Representatives: At this time I feel it is very important for my customers to contact their representatives and take a stand so that small businesses like mine can compete at the national level. Nexus laws can help, but changing the laws so that taxes apply at the point of sale would make it easier for small sellers and allow for more tax money to remain in our local communities. If they can make tax laws friendlier for small business, then I can start selling everywhere again.