STATE TAXATION
2020 Colorado Tax Legislation Update BY MARK KOZIK AND BRUCE M. NELSON
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et us be frank. This has been a crazy year for the state legislature. The pandemic not only interrupted the legislative calendar, but also it wreaked havoc on the goals of both the Democrats and the Republicans.
Instead of meeting for the traditional 120 days, the Colorado General Assembly met for only 84 days, and even that was split into two periods separated by a couple of months. The first period, which began as normal on January 8, recessed on March 14 due to the pandemic. By the time the legislature reconvened on May 26, the economic landscape had changed dramatically, leaving legislators with the task of cutting over $3 billion out of a $30 billion budget before they adjourned on June 15. Given the overall situation, some tax-related legislation that might have been introduced never was. Some that was introduced evolved significantly during the legislative process, and some that wasn’t on anyone’s radar at the beginning of the session ended up being enacted. The consequences to Colorado taxpayers are many, with, perhaps, the most significant being the decoupling of several state income tax provisions from the corresponding federal provisions enacted in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law, March 27, 2020. Before we address that nightmare, let’s begin with sales tax legislation. SALES/USE TAX CHANGES House Bill (HB)20-1020 - State and State-Administered Local (maybe) Sales Tax Exemption for Long-Term Lodging: Current law imposes Colorado state and state-administered local (state-collected city/town, county, and special district) sales tax on short-term stays (fewer than 30 consecutive days) of lodging at hotels, motels, guest ranches, auto camps, trailer courts, and the like. However, stays of 30 or more consecutive days by “any occupant who is a permanent resident” of the establishment are exempt from sales tax. This bill deletes the word “occupant” and replaces it with “natural person.” What difference does this make? None, in the case of an individual who prefers to live in a hotel rather than a house or apartment. But let’s say Jack and Jill Airlines permanently reserves 10 rooms at a local hotel for its pilots and flight attendants. The identity
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of the individual crew members who stay each evening varies, but arguably the rooms are “occupied” by the same occupant, Jack and Jill Airlines, that rents the rooms. The Colorado Department of Revenue (CDOR) traditionally has held that this type of arrangement is exempt from sales tax. However, the legislature determined that this treatment does not reflect the “presumed original purpose” of the legislation when it was enacted in the 1950’s. Further, the legislature stated that “it is the intent of the general assembly to simplify the collection and administration of taxes for the state of Colorado and to relieve taxpayers’ confusion and vendors’ administrative burdens by repealing tax expenditures that are not meeting their original purpose...” So, effective Jan. 1, 2021, to qualify for this exemption, the permanent resident must be a “natural person,” not an “occupant.” Jack and Jill Airlines is not a “natural person,” so unless a particular Jack and Jill employee enters into an agreement for a stay of 30 or more consecutive nights in a room, the exemption no longer applies. The room rental will be taxable. Colorado law provides that state and state-administered local sales tax provisions shall generally be the same. [See Colorado Revised Statute (CRS) §29-2-105(1).] However, CRS §29-2-105(1)(d) provides several exceptions to this uniformity requirement, where state-administered local sales tax is imposed on items that are exempt at the state level unless the local jurisdiction affirmatively adopts the exemption.
NewsAccount | September/October 2020
Given the overall situation, some tax-related legislation that might have been introduced never was.
