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Codes vary by state, county and city, so, do your research.
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By Judi Smith
Some time ago, a reader asked for a column on sales tax. This is a massive undertaking, because each state is unique. Sales-tax law varies nationwide, and Colorado’s is very complex.
This article is by no means complete; I can’t cover the subject in the allowable space. I’m only familiar with Colorado law. As we all know, laws change. I am no expert, merely a long-term practitioner. This article offers no guarantees. Most states, like Colorado, offer a book. Read the appropriate book of statutes, then ask your accountant questions. But I’ll cover basics.
Every governmental entity must raise money, but each taxing entity makes its own rules. States can tax residents and visitors within their boundaries. These laws affect not only the kind of tax, but its application. Most states include sales tax and property tax in that mix. However, each state has its own version of what’s taxable, as well as the tax rate.
The tax system isn’t really designed for the complexities we face: we work as contractors, conduct surveys and resell materials, etc. In most states, retailers buy their inventory tax free and tax the finished sale to the customer. Some states allow signshops to serve as contractors, and pay sales tax on the materials they use; the contractor isn’t required to collect sales tax. This practice reduces the tax on manufactured signs. Colorado doesn’t allow this designation.
In taxing sales, most states collect a percentage of product sales. However, some states have no sales tax, while other states levy a tax on sales of services as well as product. Some states charge a use tax as well, although not generally on the same goods.
Most states have one taxing entity. The state shares the tax with the cities and other entities, but this isn’t carved in stone. Colorado allows each city, county and special taxing district to set its own rates. However, in Colorado, only a “home-rule” entity can collect tax and create its own rules and forms. Most allow the state to collect the tax and pass it on to the city.
Colorado sales tax includes several exemptions. Some jobs may qualify for more than one exemption.
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