For a subscription-box seller that doesn't collect Colorado tax: does each automatic monthly shipment need its own Transactional Notice, and what notices are owed when an out-of-state buyer ships the box to a Colorado resident?

Plain-English summary

This letter is about Colorado's old "notice and report" regime for non-collecting retailers — out-of-state sellers who don't collect Colorado sales or use tax. Under that regime, a non-collecting retailer had to (a) hand each Colorado buyer a Transactional Notice telling them they may owe Colorado use tax, (b) send each Colorado buyer an Annual Purchase Summary, and (c) file an Annual Customer Information Report listing Colorado customers with the Department. An out-of-state subscription-box seller asked two practical questions about how those duties apply.

1. Do auto-renewing subscriptions need a Transactional Notice every month? No. A rule effective January 1, 2018 addresses subscription boxes and "of-the-month" clubs directly: a Transactional Notice is required only for the transaction where the customer subscribes, enrolls, or renews. The Department doesn't require a separate notice for each subsequent automatic shipment that happens without any further action by the customer. So a single notice at sign-up/renewal covers the recurring monthly boxes.

2. When an out-of-state buyer's box ships to a Colorado resident, who gets the notices? The buyer — not the recipient. The rule says that if tangible personal property is purchased by one party (inside or outside Colorado) and shipped to another party in Colorado, the "Colorado Purchaser" is the purchaser, not the recipient. So the company must give the out-of-state buyer the Transactional Notice and Annual Purchase Summary, and include that buyer in the Annual Customer Information Report sent to the Department. The Colorado resident who merely receives the gift box is not the person the duties run to.

Important context: This is a 2018 General Information Letter, and it is not binding on the Department. Colorado's tax-collection landscape changed substantially after the U.S. Supreme Court's Wayfair decision and Colorado's adoption of economic-nexus collection duties — many sellers who would once have been "non-collecting retailers" are now required to collect Colorado tax instead. Treat this letter as a snapshot of how the notice-and-report rules worked, and confirm the current rules (and whether you must simply collect) before relying on it.

What this means for you

Subscription-box and "of-the-month" club sellers

If you ship recurring boxes and you are genuinely a non-collecting retailer, you don't have to fire off a Transactional Notice with every monthly shipment — one notice at the subscribe/enroll/renew moment is what the rule asks for. But first make sure you're actually still in "non-collecting" territory: if you meet Colorado's economic-nexus thresholds, your obligation is to collect tax, and the notice-and-report path is moot.

Gift subscriptions and ship-to-someone-else orders

When the person paying is out of state and the box goes to a Colorado resident, your reporting duties run to the buyer, not the recipient. Capture and report the purchaser's information; don't assume the Colorado delivery address is the "Colorado Purchaser."

Accountants and tax professionals

The substantive holdings are narrow rule readings of § 39-21-112(3.5): the subscription/membership carve-out in Department Regulation § 39-21-112(3.5)(4)(e) (notice only at subscribe/enroll/renew) and the "purchaser, not recipient" definition of Colorado Purchaser in § 39-21-112(3.5)(2)(c). Because it's a GIL, it binds no one. For the current state of play, see the Department's later guidance on non-collecting-retailer reporting (e.g., GIL 24-002) and economic-nexus collection requirements.

Common questions

Q: Does every monthly subscription shipment need its own use-tax notice in Colorado?
A: No. Under the rule effective January 1, 2018, a Transactional Notice is required only when the customer subscribes, enrolls, or renews — not for each automatic repeat shipment made without further action by the customer.

Q: A customer outside Colorado pays for a box that ships to someone in Colorado — who do I report?
A: The buyer. Colorado defines the "Colorado Purchaser" as the purchaser of the property, not the recipient. Give the out-of-state buyer the Transactional Notice and Annual Purchase Summary and include that buyer in the Annual Customer Information Report.

Q: Is this still the law?
A: Treat it cautiously. It's a 2018, non-binding GIL. After Wayfair and Colorado's economic-nexus rules, many former "non-collecting retailers" now must collect tax. Confirm current requirements before relying on the notice-and-report path.

Q: Does this cover city sales tax?
A: No. The Department administers state and state-administered local taxes only. Colorado's self-collected home-rule cities set their own rules. Check with each home-rule city.

Citations and references

Statutes and rules:
- § 39-26-105, C.R.S. (retailer's duty to collect sales tax); § 39-26-204, C.R.S. (use tax collection)
- § 39-21-112(3.5), C.R.S. (notice-and-report duties of non-collecting retailers)
- Department Regulation § 39-21-112(3.5)(2)(c) (Colorado Purchaser = the purchaser, not the recipient)
- Department Regulation § 39-21-112(3.5)(4)(e) (Transactional Notice required only at subscribe/enroll/renew for subscriptions and memberships)
- Department Regulation § 39-21-112(3.5)(2)(d), (h), (5), (6) (Colorado Reportable Purchase; Transactional Notice; Annual Purchase Summary; Annual Customer Information Report)
- 1 CCR 201-1, Rule 24-35-103.5 (general information letter and private letter ruling procedure)

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-18-001.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-18-001
January 9, 2018
XXXXXX
Attention: XXXXXX
XXXXXX
XXXXXX
Re: Reporting Requirements for Non-Collecting Retailers
Dear XXXXXX,
You submitted a request for guidance on behalf of your client (“Company”) to
determine proper reporting practices for a business that qualifies as a NonCollecting Retailer.
The Colorado Department of Revenue (“Department”) issues general information
letters and private letter rulings. A general information letter provides a general
overview of the relevant tax issues, but is not binding on the Department. A private
letter ruling provides a specific determination for a specific set of facts, is binding
on the Department but not on the taxpayer, and requires payment of a fee. For
more information about general information letters and private letter rulings, please
see Department Rule 1 CCR 201-1, 24-35-103.5.
The Department treats this request as a general information letter. It is important
to remember that general information letters, such as this one, are general
discussions of tax law and are not binding on the Department. If Company would
like the Department to issue a private letter ruling on the issue raised here,
Company can submit a request and pay the fee in compliance with Department
Rule 1 CCR 201-1, 24-35-103.5.
Issue
1. Must a Non-Collecting Retailer issue a recurring monthly Transactional
Notice to customers who subscribe to a monthly shipment when payment is
automatic and no invoice is generated?
2. When the purchaser of a monthly subscription-based shipment is located
outside of Colorado, but the subscription shipment is delivered to and

consumed by a Colorado resident, must Company provide the out-of-state
buyer with the Transactional Notice and Annual Purchase Summary, as well
as include the out-of-state buyer in the Annual Customer Information
Report?
Background
Company, located outside of Colorado, provides a subscription-based shipment of
sample-sized products to customers across the country, including Colorado.
Customers are billed for the shipment automatically each month, with no new
invoice being generated for each payment. Company does not charge or collect
sales or use tax from Colorado-based customers.
Discussion
Colorado levies sales tax on sales of tangible personal property in Colorado and
use tax on the use, storage, or consumption of tangible personal property within
Colorado. Retailers are generally responsible for collecting Colorado sales and use
taxes.1 Retailers who sell tangible personal property to Colorado Purchasers2 but
do not collect Colorado sales or use tax are considered “Non-Collecting Retailers”
and are subject to certain notice and reporting requirements.3 A Non-Collecting
Retailer must provide a Transactional Notice4 to the Colorado Purchaser for every
Colorado Reportable Purchase at the time of the Colorado Reportable Purchase.5
A Non-Collecting Retailer must also provide an Annual Purchase Summary6 to all
Colorado Purchasers, and provide an Annual Customer Information Report7 to the
Department.
1. Must a Non-Collecting Retailer issue a recurring monthly Transactional
Notice to customers who subscribe to a monthly delivery when payment is
automatic and no invoice is generated?
A Transactional Notice is due for every Colorado Reportable Purchase. However,
the newly-adopted version of this rule, effective January 1, 2018, expressly
addresses the requirements for Transactional Notices for subscriptions and
memberships:
“With respect to any subscription or membership whereby the retailer
ships products to a customer at regular intervals, without any additional
action by the customer (commonly referred to as subscription boxes or
“
of the month” clubs), a Transactional Notice is required only
1 §§39-26-105, -204 C.R.S.

2 Department Regulation §39-21-112(3.5)(2)(c). (Defining Colorado Purchaser).
3 §39-21-112(3.5), C.R.S.; Department Regulation § 39-21-112(3.5)(2)(f).

4 Department Regulation §39-21-112(3.5)(2)(h). (Defining Transaction Notice).

5 Department Regulation §39-21-112(3.5)(2)(d). (Defining Colorado Reportable Purchase).
6 Department Regulation §39-21-112(3.5)(5).
7 Department Regulation §39-21-112(3.5)(6).

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with respect to any transaction whereby the customer subscribes,
enrolls or renews her or his subscription or membership. Separate
Transactional Notices are not required for the subsequent, repeated
shipment of products to the customer made automatically and without
additional action by the customer.”8
If a taxpayer’s monthly subscription business meets the criteria above, a recurring
Transactional Notice is not required for the subsequent, repeated monthly
shipments.
2. When the purchaser of a monthly subscription-based shipment is located
outside of Colorado, but the subscription shipment is delivered to and
consumed by a Colorado resident, must Company provide the out-of-state
buyer with the Transactional Notice and Annual Purchase Summary, as well
as include the out-of-state buyer in the Annual Customer Information
Report?
A Non-Collecting Retailer must furnish a Transactional Notice and Annual
Purchase Summary to all Colorado Purchasers. A Colorado Purchaser is “a
purchaser who makes a Colorado Reportable Purchase.”9 The applicable
regulation explains that “[i]f tangible personal property is purchased by one party,
who may be inside or outside of Colorado, and is shipped to another party in
Colorado, the Colorado Purchaser is the purchaser of the tangible personal
property, not the recipient of the tangible personal property.”10 Therefore,
Company must provide the out-of-state purchaser with the Transactional Notice
and Annual Purchase Summary and include the out-of-state purchaser in the
Annual Customer Information Report sent to the Department.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are
knowledgeable on state taxes issues. However, the Department does not make a
specific determination here on any of the issues raised and the Department is not
bound by this general information letter.
The Department administers state and state-administered local sales and use
taxes. This letter does not address sales and use taxes administered by home-rule
cities and home-rule counties. You may wish to consult with local governments
which administer their own sales or use taxes about the applicability of those
taxes. Visit our web site at www.colorado.gov/tax for more information about state
and local sales taxes.
8 Department Regulation §39-21-112(3.5)(4)(e).
9 Department Regulation §39-21-112(3.5)(2)(c).
10 Id.

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Enclosed is a redacted version of this letter. Pursuant to statute and regulation,
this redacted letter will be made public within 60 days of the date of this
letter. Please let me know in writing within that 60 day period whether you have
any suggestions or concerns about this redacted letter.

Sincerely,

Office of Tax Policy
Colorado Department of Revenue

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