By Nick Kump and Amy Nogid

The Colorado Department of Revenue (Department) released a non-binding general information letter,  concluding that a marketplace provider’s payment of sales tax on transactions involving “jointly responsible” third-party retailers discharges the obligations of the third-party retailers to collect and remit sales tax. By statute, the Department has discretionary authority to treat an agent for a retailer as “jointly responsible” for the collection and remittance of sales tax, and can pursue the retailer’s agent when it is “necessary for the efficient administration” of the sales tax. Here, the marketplace provider, which operates a marketplace for third-party digital products such as games, apps, movies and books, and collects and remits sales tax on purchases of the third-party products, stated that it did so as a “jointly responsible” retailer. Relying on the principles of contract law, the Department determined that while both parties were liable for the full amount of sales tax, the marketplace provider’s payment of the correct amount of sales tax discharged the third-party retailers’ sales tax obligations. However, even though the third-party retailers were relieved of their immediate sales tax obligations, the Department could still collect the tax from either the marketplace provider or the third-party retailers, if a deficiency were to occur in the future. The Department added that if the marketplace provider exercises reasonable diligence when accepting an exemption certificate or sales tax license, then both of the jointly responsible retailers would be relieved of liability for collecting tax if the Department later determines that the exemption did not apply. Colo. Gen. Info. Letter No. GIL-16-020 (Colo. Dep’t Revenue Oct. 4, 2016, released Dec. 7, 2016). Colo. Gen. Info. Letter No. GIL-16-020 (Colo. Dep’t Revenue Oct. 4, 2016, released Dec. 7, 2016).