Governor Polis signed HB22-1027 on January 31, 2022, which extends the small business exception to destination sourcing requirements. This exception applies only to businesses with less than $100,000 in retail sales. Beginning October 1, 2022, all retailers will be required to apply the destination sourcing rules below. The Department does not have the authority to grant exceptions to these rules. For more information, visit the Transition to Destination Sourcing web page.
General Destination Sourcing Rules
In general, a retail sale is made at the location to which it is sourced in accordance with the following rules:
- If the purchaser takes possession of the purchased property or first uses the purchased service at the seller's business location, the sale is sourced to that business location.
- If the property or service is delivered to the purchaser at a location other than seller's business location, the sale is sourced to the location the purchaser receives the purchased property or first uses the purchased service.
- If the purchaser requests delivery of the property or service to another recipient (i.e. the purchase is a gift), the sale is sourced to the location the recipient takes possession of the purchased property or first uses the purchased service.
If a sale cannot be sourced using the preceding rules, Section 39-26-104(3)(a), C.R.S., provides additional guidelines for sourcing retail sales based upon the seller's records, the purchaser's payment instrument, or the location from which the property was shipped. These sourcing rules do not apply to leased property. See Department publication Sales & Use Tax Topics: Leases for sourcing rules for lease payments.