September 28, 2023
Across Colorado, it’s been reported that retail sales are down by 15 percent due to COVID-19. Due to the pandemic, many businesses are closed temporarily while others have gone out of business.
Still, if you’re a small business owner in Colorado, you need to make sure you stay on top of your state sales tax reports. Even if a business doesn’t collect anything, failing to file your state sales tax reports can be considered tax fraud.
Here’s what you need to know about tax fraud and the potential penalties associated with it in Colorado, even in the midst of COVID-19.
Sales Tax in CO
There are no federal sales taxes on purchases made, but individual states and municipalities do expect businesses to charge, collect, and remit sales tax to the taxing authority. If you fail to do so and abide by Colorado’s tax laws, then it can result in legal charges and penalties.
For any small business owner, it is their responsibility to ensure sales taxes are being properly collected and reported, even if no sales are made.
What Does Colorado Consider Tax Fraud?
If you fail to collect any sales tax required by the law in Colorado, then it can be construed as an act of tax fraud.
While it is generally considered a white-collar crime that occurs within a business setting, it is a criminal act taken seriously by state governments because it reduces the amount of revenue collected by the state.
In Colorado, you must file your Retail Sales Tax return on the 20th day of the month following the end of your filing period.
The frequency with which you must file is determined by the amount of monthly sales tax you collect. Failure to do so can result in charges and associated penalties under Colorado law.
Penalties for Colorado Tax Fraud
In Colorado, willfully attempting to evade paying taxes to the state is considered a Class 5 felony. It is also considered a Class 5 felony in Colorado if you fail to account for or collect the tax that you are legally responsible for remitting to the local tax authorities.
Conviction of these offenses can result in up to three years in prison as well as fines up to $100,000. There are also civil penalties to think about that can result from failure to pay or file state sales tax, even if you have nothing to pay.
The Colorado Department of Revenue assesses penalties as well as interest from the date the taxes were due. You may owe accrued interest on late taxes that are compounded by daily short-term rates.
In Colorado, that can mean 10 percent of the taxes you owe plus 0.5 percent tax due per month. The assets of the business owner can also be seized in order to pay off the debt.
If you find yourself in a position where you can’t pay the taxes owed to the state, you will still be held accountable. The business owner is personally liable for sales tax in Colorado and it will follow you until it is paid.
Staying On Top of Your CO Sales Tax
Tax laws are complicated, and people can make mistakes when filing their taxes – or failing to do so. It gets even more complicated when a pandemic is thrown into the picture and your business isn’t operating as it normally would.
While this is an unprecedented time, it’s still important to stay on top of your business commitments, especially when it comes to paying your taxes.
About the Author:
Denver-based criminal defense and DUI attorney Jacob E. Martinez is a knowledgeable and experienced litigator with a record of success providing innovative solutions to clients facing criminal charges of any severity. Mr. Martinez has been recognized by countless legal organizations for his exemplary defense work, including Avvo, Best DWI Attorneys, Expertise, Lawyers of Distinction, The National Trial Lawyers, and others. He was also named one of the 10 Best in Client Satisfaction in Colorado by the American Institute of Criminal Law Attorneys for 2020 and is Lead Counsel rated.