Just when we thought the state of Colorado was making progress in working with Home Rule jurisdictions, the city of Castle Pines moved in the opposite direction (see What’s in a home rule jurisdiction? Hidden tax traps and shifting sentiment). Effective Jan. 1, 2020, the city of Castle Pines became a home rule jurisdiction in Colorado, and the transition has not been smooth.
Previously state collected, the home rule designation gives the city greater control over tax rates and rules within the jurisdiction. Located 30 miles south of Denver, Castle Pines should by now be receiving sales and use taxes directly from companies engaged in business within the city limits and registered for an annually-renewable Castle Pines sales and use tax license.
As part of the transition from a statutory jurisdiction, however, the city downloaded all their sales tax data from the state, and sent out delinquency notices to everyone on that list to obtain a sales tax license. Also, the city’s “doing business” statute has both an aggressive physical presence standard and economic presence threshold standard.
From a physical presence nexus perspective, a liberal reading of the ordinance might include websites directed at Castle Pines residents to meet the solicitation requirement. From an economic nexus perspective, can thresholds imposed by a home rule jurisdiction even survive scrutiny under Wayfair?
The Takeaway
While these efforts may seem like overreach and unconstitutional, fighting this change might not be worth the effort, especially for businesses that have automated their sales and use tax processes. Businesses may be seeing notices coming soon from Castle Pines.
Let’s Talk Tax
Contact Alexander Korzhen at akorzhen@taxops.com or 763.703.5713.
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