Retailers making sales in Colorado face a new administrative challenge (in a state well-known for its administrative challenges) beginning July 1, 2022. The state will begin imposing a $0.27 fee on every retail delivery made by motor vehicle to a destination in Colorado. The fee will apply when at least one item is subject to sales or use tax and the delivery is mailed, shipped, or delivered by motor vehicle. Wholesale sales or sales of exempt goods are not subject to the retail delivery fee.

The seller is responsible for collecting and remitting the retail delivery fee even when delivery is made by a third party. In addition, the retail delivery fee must be separately stated on the customer’s invoice. The state has created a Retail Delivery Fee Return (DR 1786) that is due on the same frequency as the retailer’s Colorado sales tax return. Retailers currently registered for sales tax will automatically be enrolled in a retailer delivery fee account.

Colorado’s retail delivery fee applies to anyone making retail sales in the state without regard to whether the seller is located in-state or out-of-state. The retail delivery fee will require retailers to modify their sales systems and/or invoicing to capture the $0.27 fee when sales are delivered to Colorado customers. The state has rarely shown concern for the burdens it imposes on retailers. The retail delivery fee will only enhance the state’s reputation as a difficult place to do business.

For more information on the retail delivery fee, visit Colorado’s website here.

If you have questions on Colorado’s new retail delivery fee or other SALT matters, please contact HBK’s SALT Advisory Group at hbksalt@hbkcpa.com.

A budget—or a proforma, forecast, or projection—is a financial prediction of what might happen over a given time period. As such, manufacturing businesses use budgets to prepare for the year ahead. Executives, managers, and financial professionals employ budgets to aid in their decision-making and to ensure their company is on the right path toward meeting its financial goals.

Think of budgeting as a short-term financial planning process for your business. While a budget itself doesn’t serve to increase profits, it can help you gain the visibility needed to make the kind of decisions that increase profitability, improve cash flow, and otherwise better your company’s financial position. A budget can also help you identify red flags and allow you to take quick action to either mitigate or prevent an issue from having negative financial consequences.

Budget for More Than Your Profit
Preparing budgets takes time and insight, likely from many areas of your business: prior year trends, sales forecasts, internal projects, changes in your industry. Also, be sure to include all areas of your financial performance in your budgeting considerations. Some manufacturers only focus their budgeting efforts on their profit or loss, but other areas can be just as important to your future. For instance:

1. Is your business planning to invest in new equipment? If so, you could encounter a cash outlay that is not reflected on a proforma income statement. A cash forecast can help you plan for a major purchase while ensuring that you do not affect the business’s daily operations.
2. Are your sales increasing? Will you need to hire new employees? Understanding your compensation and training costs at a detailed level can help you make good decisions as you grow, such as the right timing for adding new hires.
3. Does your lender require you to meet covenants? Review your covenant agreements and consider preparing forecasts for these financial metrics so that you understand how to remain in good standing.

Prepare for Change
No matter how much time and effort you spend on a budget, it’s not likely to be perfect. Change is constant. So when conditions change, or when you find yourself outperforming or not meeting your budget, what should you do?

The worst thing to do is discard your budget. Even imperfect budgets have great value. Determine why your results differ from your projections. Can you learn from past budget flaws to become more precise in the future?

Consider making changes to your budget or creating a rolling budget. A rolling budget predicts a full year ahead, for example, as opposed to a calendar or fiscal year. Rolling budgets help you project financial performance on an ongoing basis.

For questions or to discuss budgeting options for your company, contact a member of the HBK CPAs & Consultants’ Manufacturing Team at 330-758-8613.

Effective April 1 2019 the state legislature of California enacted economic nexus for sales tax with a threshold set at $100,000, however, effective immediately, the state has changed this provision by increasing the threshold to $500,000. This change impacts any business which sells products or services within or to individuals or business into the state of California. It does include online sales.

If you registered under the $100,000 threshold (and don’t exceed the new $500,000 threshold), you can choose to either maintain your account or cancel it if you no longer meet the economic nexus thresholds within the state. Please keep in mind that if you do not meet the new $500,000 threshold and choose to maintain your account with the state of California you may still have filing requirements.

The California Legislature recently passed Assembly Bill No. (AB) 147 which requires:

Retailers located outside of California (remote sellers) to register with the California Department of Tax and Fee Administration (CDTFA) and collect California use tax if, in the preceding or current calendar year, the total combined sales of tangible personal property for delivery in California by the retailer and all persons related to the retailer exceed or exceeded $500,000; and

All retailers required to be registered with the CDTFA, whether located inside or outside of California, to collect and remit district use tax to the CDTFA on all sales made for delivery in any district that imposes a district tax if, in the preceding or current calendar year, the total combined sales of tangible personal property in this state or for delivery in this state by the retailer and all persons related to the retailer exceeds or exceeded $500,000.

The new collection requirements are operative as of April 1, 2019, and supersede our previous direction regarding 1) the use tax collection requirements for out-of-state retailers (see Special Notice L-5652), and 2) the district use tax collection requirements for all retailers, including retailers located inside or outside California (see Special Notice L-5913).

If you are a remote seller who previously registered with the CDTFA to collect California use tax due to the state’s prior direction (see Special Notice L-565), and you do not meet the new $500,000 sales threshold pursuant to AB 147, nor do you have any contacts with California that would qualify you as a retailer engaged in business there, you may either close your account or continue to collect the use tax as a courtesy to your California customers.

To close your account, please contact the California legislature’s Customer Service Center at 1-800-400-7115. Please be advised, any use tax collected by you from your California customers must be reported and paid to the CDTFA. Additional registration and fee collection requirements for sales of certain items may apply.

Please note: If you sell 1) new tires or vehicles and equipment that include new tires, 2) covered electronic devices, 3) lead-acid batteries, or 4) lumber or engineered wood products, you may have additional registration and fee collection requirements.

If you have questions, please contact HBK Tax Advisory Group member Cassandra Baubie, JD, at CBaubie@hbkcpa.com.

This document provides a guide on how drop shipping relationships have changed following the new tax laws and regulations after the decision in South Dakota v. Wayfair.

Drop shipping is a fundamental aspect of the supply chain and represents two separate and distinct transactions. The seller accepts orders from their customers, invoices the customers and receives a shipping address. That shipping address can be in a state in which the seller has a presence or any other state that the seller is not located in. The seller then places an order with the supplier to fulfill the customer’s order who will ship that product directly to the shipping address provided. The supplier never invoices or deals directly with the customer; they engage in a sale solely with the seller.

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