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Why is tax calculating oddly in Colorado?

Overview

You noticed that in Colorado tax is calculating differently for each city, even with the same tax code, specifically at a lower rate than it should be or certain jurisdictions are not being charged tax.

Environment

Avalara Avatax

Colorado

Resolution

  • In Colorado each municipality gets to make their own decisions for tax law, so a product can be taxable in one city, but the city next to it can make a different decision, and the same product is not taxable. 
    • As a result you can see the state tax for Colorado appear on all sales, but the cities, counties, and special jurisdictions may be a combination of taxable and non-taxable for an individual item sold.
    • The state can consider something non-taxable, but if the city where the item is being sold to considers it taxable, you can see tax at only the city level
    • An item can be taxed differently in each jurisdiction in a single sale (based on the address) because municipalities can make their own tax determination
  • Since local jurisdictions make their own tax determinations, your business tells Avalara whether you are obligated to collect tax in most local jurisdictions in Colorado via nexus settings at the City and Special Jurisdiction (local) level:
    • Go to Organization > Nexus United States > Colorado > Select Local Jurisdictions:
      • Be sure that your nexus settings for non compulsory jurisdictions in states like Colorado reflect where you are required to be collecting and remitting based on your business profile within the state, and those local jurisdictions
  • Tax will only calculate for a selectable local jurisdiction when nexus is selected and that jurisdiction considers the item you are selling to be taxable