How can I use full Destination Sourcing for sales tax in Colorado?

[Snortimer]

Hi!

Colorado is switching to full destination sourcing for sales tax, meaning that I have to start collecting sales tax from any buyer in Colorado at a rate determined by their local taxes (not mine, and not just state sales tax).

Square Support says they don't have any feature like this, and I'll soon be breaking sales tax laws if I continue to use Square without this feature. It would be stupid for me to create manual tax rates since there are literally hundreds of tax districts in Colorado, and not all of them are broken down by ZIP code.

Even if I lost out a bit on the special districts (since Square seems to have left those out of at least some of the districts in my city), I'd be a lot closer to compliance if they'd at least do the basic calculations required by law in Colorado.

So, if you're the Square team, please add proper destination sourcing calculations in Colorado. You already check for nexus to determine state sales tax and local sales tax, and you already have a list of local sales tax rates (which is mostly correct). Please adjust your calculation to allow calculation by destination tax rate as long as the buyer is in the same state as the seller (complete local rate, not just state and local to the seller).

I'd hate to have to stop using Square because it doesn't calculate tax rates in a way that is compliant with Colorado state laws (this law change has been in the works for years, has been in effect for large businesses for a couple years, has had a grace period for small businesses for the last few months, and affects every business in Colorado, so it's not exactly a surprise or an unusual issue).

[ryanwanner]

Hello @Snortimer !

Being in Colorado, I know how much the state is making this a pain in the you know what when it comes to the sourcing rules. I don't have the answers you need unfortunately, but I did find one thing that should make things a little easier for you temporarily:

The new regulation only kicks in once you've passed $100,000 in inbound retail sales in the year. If you're doing that kind of volume into the state that's awesome--and you should open a store here to get past all this nonsense. 😉

So while Square figures out how to make this work for you, I hate to say this but I think it'll be up to you to manually figure every sale past 100k. I found this Sales Tax Rate Calculator pdf showing all the municipalities' rate structure.

For anyone interested in what in the world we're talking about: Destination Sourcing

I'm also going to tag @AdamB , who is an admin who lives and breathes Square Online: hopefully he can get this in front of the dev teams responsible for taxes.

[Snortimer]

The $100,000 threshold exemption expires in just over a week. Since SUTS has been up and available for nearly 90 days, the exemption is phasing out on the 31st.

All businesses, regardless of size, must use destination sourcing starting February 1st.

[ryanwanner]

@Snortimer you are correct about the phase out. 

Are you located in the state? From what I can tell from my research the destination sourcing only applies to in-state businesses. Out of state businesses that do under 100k in sales inside the state are still exempt (source)

In state sales should be able to finagle the tax rate using the online sales tax collection portal. Now how to configure your tax structure on the online store, well, that definitely is something that needs to be looked at. Worse case scenario that I can see is to change your in-state tax rate to the maximum for all CO sales then refund back the difference. It’s not pretty but it’s a workaround

[Snortimer]

I am, in fact, in Colorado; that’s why I’m worried about it.

My current plan is to wait until February 1st and see if whoever Square uses to calculate sales tax has fixed it for Colorado. If they haven’t, I’ll try to block sales to Colorado residents (maybe 1-2% of my customers). I can enable local pickup or something, or have them talk to me and I’ll invoice them.