In an attempt to close the state’s more than $600 million budget shortfall, Colorado Governor Bill Ritter signed into law last week rollbacks of several tax breaks and other business exemptions, including new sales tax requirements for out-of-state online retailers selling to customers in Colorado. The new laws took effect Monday, March 1.

Under the new law (HB 1193) online retailers without a physical presence in the state of Colorado either must collect a sales tax or notify each Colorado customer that sales or use tax is due on all purchases from the business. Online retailers with a physical presence in the state are already required under current law to collect sales tax on all purchases.

Failure to either collect sales tax or notify the customer will subject that out-of-state business to a $5 penalty for each failure to notify. The business also must send separately to each Colorado customer an end-of-year summary showing the total amount paid by the customer for all purchases over the past year to that business with a reminder that the customer is obligated to file and pay the appropriate taxes. The business must also send to the Colorado Department of Revenue a statement detailing each Colorado customer’s purchasing activities during the preceding calendar year or face a $10 penalty for each purchaser who should have been included.

Retailers that made total gross sales in the prior year of less than $100,000 are exempt from the notification requirements.