Colorado’s House Committee on Appropriations overwhelmingly approved HB 22-1118, moving it forward to the Committee of the Whole. Among other provisions, the bill, which was introduced January 21, 2022, imposes penalties on frivolous sales and use tax refund claims filed with the CO DOR.
“ This revenue is classified as a damage award and not subject to TABOR. ”
Penalties for Third Party Preparers
A refund claim would be considered "frivolous" if it is materially incomplete, duplicative, or lacking a reasonable basis in law or fact. Additionally, a claim would be considered "materially incomplete" if it does not include the correct form or lacks the pertinent data, information, and documentation required by law and regulations.
If a purchaser files a frivolous claim for a sales and use tax refund totaling at least $5,000, the bill requires the executive director to assess and collect, in addition to other penalties provided by law, a civil penalty equal to 10% of the total refund claimed. If the frivolous claim is prepared in whole or in part by a person other than the purchaser, the Director can impose the penalty on that third party. Nonetheless, purchasers or preparers potentially subject to the penalty would be notified by the Director and given the opportunity to perfect or withdraw their claim before penalties were imposed.
In addition to imposing penalties, the bill reduces the time period during which interest is accrued on a sales tax refund claim, changing the time period to when the refund claim is filed rather than the purchase date.
The bill takes effect on July 1, 2022.