Colorado Use Tax: 'From the Horses' Mouth'

  • By Shanah Schaffer
  • •
  • 11 Jan, 2018
  • •

The really skinny on Use Tax in Colorado direct from their site 

Use tax is real, and being enforced!  Have you ever bought anything out of state or online to avoid paying sales tax?  Well, Colorado says you must still tell them!  (And many cities within Colorado as well).  This applies to both businesses and individuals.  Yes, that means that TV you bought online with no sales tax should be reported to the state, and the tax paid to them directly.  

We can help navigate this difficult law, not only in Colorado, but all over the country please read on below for the exact word from Colorado, and contact us directly to find out the rules for your state:

**The text below was copied directly from the Colorado Dept of Revenue Site.  This is not an opinion, nor is this material owned by posting party.

Use Tax Notice and Reporting Requirements

Colorado adopted a Use Tax in 1937, which requires individuals and businesses to pay use tax on tangible personal property purchased from out-of-state vendors if the item is used, stored, or consumed in Colorado. Consumer use tax must be paid by individuals and businesses for tangible personal property used in Colorado for personal or business purposes (not to be resold) when tax was not paid at the time of purchase.
 
In 2010, the Colorado General Assembly passed HB 10-1193, which established notice and reporting requirements for retailers that make sales into Colorado but do not collect Colorado state sales tax. For seven years, state and federal injunctions prevented the Colorado Department of Revenue (CDOR) from implementing this law. In February 2017, the parties in DMA v. Brohl entered into a settlement, resulting in the dissolution of the injunctions that had prevented enforcement of the notice and reporting requirements.
 
CDOR began enforcement of the reporting and notification requirements on July 1, 2017. The Department has agreed to waive any penalties for failure to follow the law’s notice and reporting requirements for transactions occurring prior to the effective date of July 1, 2017. CDOR promulgated amendments to Rule 39-21-112(3.5), effective January 1, 2018, to provide guidance to retailers that do not collect Colorado sales or use tax and are subject to the notice and reporting requirements of this law.
 
Read publication FYI General 10: Consumer Use Tax for more information about this tax type. Publication FYI Sales 79: Sales of Taxable Items Over the Internet also has more information and resources about this issue. You can also download the CDOR-AnnualCustomerInformationReport.TEMPLATE along with the Instructions, Format and FAQ for these reports.

I've Done All This Work For My Business, Now How do I Pay Myself? 

By Shanah Schaffer • May 13, 2018
OK.  You have been working your butt off, and taking money as you needed.  What should you be doing?  Well, the answer to that depends mostly on your business structure.  If you are a sole-proprietor, or any other disregarded entity, you can only pay yourself using draws, or distributions.  However, under certain corporate structures, you must pay yourself as any other W2 employee, and it must be a 'reasonable salary' as defined by the IRS.

In any case, most people are required to make estimated tax payments to the IRS, either in the form of W2 withholdings, or direct estimated payments.  If you are not doing this in one form or the other each quarter, we should review with you the process you currently use to keep you compliant.  

We can help you determine how you should be paying yourself, set it up for you correctly, and make sure you are adhering to the income tax laws for self-employed individuals.  Give us a shout, and let us help unravel the mystery!

Are They a Contractor? (1099) or Employee? (W2)

By Shanah Schaffer • January 29, 2018
Ahhh, the age-old business dilemma, do I hire a Contractor, or an Employee?  Or for that matter, who are the ones already working for/with me?  The IRS is very clear on the matter, and the State's are usually  even stricter.  At any time, the Department of Labor in your state can request an audit of your books for just this, and they are very particular.  

So, what is the difference?  A simple Google search of the IRS or state sites, and you can find the details.  But, to save you some time, (and a headache from reading tax code), here are  a few of the basics:

1. A contractor does not work according to your schedule, they are not 9-5'ers, or nor do they belong on a weekly or bi-weekly scheduling sheet.  These are people that you hire to perform a job, not work shifts.  Their deadlines are often implied, (such as ours with the deadlines set by the IRS and states), or agreed upon before starting.  

2. A contractor should have an established business presence, and/or others clients that they perform the same types of 'jobs' for, (for instance, we do Accounting for multiple clients, not just you).  An established business presence is dictated by examples such as the following:  a website, business cards,  print or other advertising media, etc... 

3.  A contractor uses their own tools, supplies, and equipment.  An employee is provided the tools and equipment to do their job.  This can be a bit sticky, but is used as a determining factor.  A good example is whomever you hire to clean your offices.  If you have all of the equipment, (ie vacuum, etc..), and buy the cleaning products, paper supplies, etc, then that person is an employee.  Even if they have other customers, it may be called into question.  A 'service' that hires their own staff, brings their own equipment and materials, etc. are Contractors, and should be treated as such, and issued a 1099 at the end of the year.

A couple other quick side notes for 1099's, and workers:

1.  Individuals can be considered 'household employers', and that must be handled differently.  (Cooks, Nannies, Housekeepers, Gardeners, etc). Contact us for help with your specific situation.

2.  All Individuals and Unincorporated businesses should be issued 1099's, (LLC's, etc), and ALL attorneys regardless of business structure.  (Provided they meet the minimums for the year).  

3.  You should also be issuing 1099's for all Commercial Rents, and in special circumstances, Interest paid.  Contact us for help with your specific situation.  

What Does the Tax Reform REALLY mean for you?

By Shanah Schaffer • December 26, 2017
 The new law has been signed in, and every news outlet has a different take.  Is this a change for the rich? The middle class?  How will the change affect me, and just how long will the changes stand?  The truth of the matter is we are in a very volatile political climate.  As you have seen during this year, the laws of yesterday, are different today.  And depending what happens in the 2018, 2020, 2022, and 2024 elections, it can all change again.    
 So what do you do?  For small business owners this is a rather deep question.  First and foremost, you should review where you stand today.  Is your current business structure what it should have been from the beginning?  Then, you should run through some scenarios with your tax professional for the 2018 tax year.  Yes, the new, lower corporate rate may have you itching to run out and Incorporate, but there are other costs, and options that must be considered.  (Such as the 20% deduction for certain pass-through entities such as LLCs, and Sole Proprietors).
 What you do NOT want to do, is what I call 'Panic-planning'.  This is a very large document, and all of us in the industry are working to understand the widespread implications to each part.  Take your time, talk to many, and consider riding out 2018 as you are currently set up to understand the full effects before you change.  Lastly, make sure you remember that all of this can shift in the future depending on if the political winds change, or stay the same.  

QuickBooks Desktop Vs Online:  What’s the scoop?

By Shanah Schaffer • May 12, 2017

If you are thinking about starting a business, or already have one that needs to be more organized, you have probably thought about using an Accounting Software. (We will compare QuickBooks with some of the others around in future posts).

With so many options out there, it is nice to go with a tie- and-true name like QuickBooks. But to go online, or stay on desktop? How do you know which will work for your business?

Eventually down the road, I believe the desktop version will be phased out, and all will be Online. That being said, the Online version has been playing catch up with functionality since its release.

The biggest question right now, is the level of functionality. Online is more restrictive in the amount of altering you can do with transactions, and the reporting functions are lesser in that more customization is necessary to access the same level of reporting. However, for ease of access, (especially for multiple parties), there is no equal.

Our recommendation as of this post is to make your decision based on your business model. If you are tracking inventory, or have complex job costing you need to do, online is probably not the right answer.

Similarly, if you have very complex payroll scenarios, or need advanced reporting capabilities. However, if none of those apply, and you need more than just yourself to access the file regularly, online is probably the best bet.

We can help you make the determination of which is best for you, as well as explore the other Intuit offerings such as POS systems, etc.  Contact us for a free consultation !

Loans vs Lines of Credit:  Which costs me less?

By Shanah Schaffer • May 12, 2017

Very often as small business people we need a lump of cash for equipment, to bridge an AR gap, or for other forms of growth.

Hard money lenders will leach everything from you in interest.

If you have a good banking relationship, chances are you can approach your bank for help. When offered a chance to apply for a loan or Line of credit, we will always recommend you go with the Line.

Remember, loans are charging you interest on the entire amount when it is funded. You continue to pay interest until the balance is paid in full. Lines are similar in that interest grows on any unpaid balance, but you can pull only what you need, and have a better chance of paying it down in smaller pieces, saving lots on interest charged. 

I can do my own taxes, can't I??

By Shanah Schaffer • May 12, 2017

You are a smart, dedicated, logical professional.

How hard could it be?

With all sorts of large companies offering silly gimmicks for online processing, it seems like you should be able to do it yourself. And you can. Especially if your tax situation is simple, such as no dependents, and all W2 income.

However, if you are an hourly employee working for someone else, chances are, you are not on our website. You are here because you, as a business person, understand fully that your time is probably better spent working on the operation of your business. The long and short? You wouldn’t ask your Attorney friend to cut your hair just because they are an intelligent person with common sense. You go to a stylist. Likewise, let a professional do your taxes.

We can mostly offer comparable pricing to the big guys, while being able to offer the security of knowing you have a true professional on your side.

Tax Professional vs. Accountant vs. CPA: What the heck is the difference?

By Shanah Schaffer • May 12, 2017

Ahhh the mystery of the Title. What does it all mean? Each state has different governing rules, but here in Colorado, the title an Accounting person carries, (except for a CPA), is mostly self-designated. For the most part, however, you can go by the following guide:

  1. Tax Professionals are people that are trained by the company they work for, (H&R Block, Jackson Hewitt, etc..), to process returns based on the answers provided to their system. These folks may or may not have Accounting backgrounds and education. They are mostly there to follow the software.
  2. Accountants are usually folks that carry the Accounting education and experience, but did not go a far as a CPA for whatever reason. These individuals will often prepare returns, and may have designations with the IRS to do so.
  3. A CPA went all the way. They carry the designation, and have continuing education requirements that keep them up on all new IRS tax codes, changes to regulation, etc. These folk may or may not do the Bookkeeping or accounting portion, and most often do only the return prep.

The good news? We have a full team that is comprised of all the above professionals to help serve your needs as they arise! Simply send us your contact information, and we will set up a complimentary consultation.