C.R.S. § 39-21-119.5 — Mandatory electronic filing of returns - mandatory electronic payment - penalty - waiver - definitions

(1) For purposes of this section, return means any report, claim, tax return statement, or other document required or authorized under articles 11 and 25 of title 29, article 11 of title 30, articles 22, 26, 27, 28, 28.5, 28.6, 28.8, 29, and 37 of this title 39, article 2 of title 40, article 3 of title 42, article 4 of title 43, and title 44, and any form, statement report, or other document prescribed by the executive director for reporting a tax liability, a fee liability, or other information required to be returned to the executive director, including the reporting of changes or amendments thereto, and any schedule certification, worksheet, or other document required to accompany the return. (2) Except as provided in subsection (6) of this section, the executive director may, as specified in subsection (3) of this section, require the electronic filing of returns and require the payment of any tax or fee due by electronic funds transfer for the following: (a) Any income tax return required for: (I) A C corporation pursuant to section 39-22-601 (2); (II) An S corporation pursuant to section 39-22-601 (2.7), including the information reports required by section 39-22-601 (2.7)(b), composite returns filed on behalf of nonresident shareholders, and agreements filed under section 39-22-601 (2.7)(e); (III) A fiduciary pursuant to section 39-22-601 (3), including withholding for nonresident beneficiaries pursuant to section 39-22-601 (4); (IV) A partnership pursuant to section 39-22-601 (5.5), including the information reports required by section 39-22-601 (5.5)(b), composite returns filed on behalf of nonresident partners, and agreements filed under section 39-22-601 (5.5)(e); and (V) A person or organization exempt from tax pursuant to section 39-22-601 (7). (b) Any payment of income tax required by: (I) Withholding for transfers of Colorado real property pursuant to section 39-22-604.5; (II) Estimated payments by a C corporation pursuant to section 39-22-606; and (III) Income tax payments due with return filing pursuant to section 39-22-609, but not for individuals who are required to file a return pursuant to section 39-22-601 (1); (c) Any remittance of wage withholding required to be made by an employer pursuant to section 39-22-604 that is not already required to be remitted electronically pursuant to subsection (4)(g) of this section; (d) Any withholding of income report required to be filed for any oil and gas interest pursuant to section 39-29-111; (e) Any severance tax return from any oil and gas interest required to be filed pursuant to section 39-29-112; (f) Any sales tax return required to be filed pursuant to section 39-26-105; (g) Any sales tax return required to be filed by a person with a direct payment permit issued pursuant to section 39-26-103.5; (h) Any use tax return to be filed and payment required to be paid pursuant to sections 39-26-204 (1)(a) or (2); (i) Any motor fuel tax or fee return required to be filed and payment required to be made pursuant to section 39-27-303; (j) and (k) Repealed. (l) Any public utility return required to be filed pursuant to section 40-2-111 and the payment required to be made pursuant to section 40-2-113; (m) Any passenger-mile tax return to be filed and payment required to be made pursuant to section 42-3-308; (n) Any liquor excise tax return required to be filed and payment required to be made pursuant to section 44-3-503 (3); (o) Any direct shipper return required to be filed pursuant to section 44-3-503 (5) and the payment required to be made pursuant to section 44-3-503 (6); (p) Any county lodging tax return required to be filed and payment required to be made pursuant to section 30-11-107.5; (q) Any marketing and promotion tax return required to be filed and payment required to be made pursuant to section 29-25-112 (1)(b)(I); (r) Any daily vehicle rental fee report required to be filed and payment required to be made pursuant to section 43-4-804 (1)(b)(II); (s) Any prepaid wireless 911 charge report required to be filed and payment required to be made pursuant to section 29-11-102.5 (3); (t) [ Editor's note: This version of subsection (2)(t) is effective until January 1, 2026. ] Any prepaid wireless telecommunications relay service charge report required to be filed and payment required to be made pursuant to section 29-11-102.7 (3); and (t) [ Editor's note: This version of subsection (2)(t) is effective January 1, 2026. ] Any prepaid telephone disability access charge report required to be filed and payment required to be made pursuant to section 40-17-104; and (u) Any retail delivery fee or enterprise retail delivery fees return required to be filed pursuant to section 43-4-218 (6). (3) The executive director shall promulgate rules in accordance with article 4 of title 24 to implement mandatory electronic filing and electronic funds transfers for the returns and payments described in subsection (2) of this section for taxable periods beginning on and after January 1, 2020, or on and after the date when the executive director establishes a system for electronic filing and electronic funds transfers, whichever occurs later. Mandatory electronic filing and mandatory payment by electronic funds transfers must be staggered for each tax type over a period of not less than three years, must begin with large taxpayers, and may allow additional time for small taxpayers to comply. The thresholds for each implementation group shall be determined by the executive director in his or her discretion. (4) Except as provided in subsection (6) of this section, on and after August 2, 2019, electronic filing of returns and the payment of any tax or fee by electronic funds transfer is required for the following: (a) Any income tax return claiming an enterprise zone credit required to be filed pursuant to section 39-30-111; (b) Any withholding of income required to be made from any oil and gas interest pursuant to section 39-29-111; (c) Any sales tax remittance required to be paid pursuant to section 39-26-105.5; (d) (I) Any gasoline or special fuel report required to be filed pursuant to section 39-27-105; (II) Any road usage fee report or bridge and tunnel impact fee report required to be filed with a gasoline or special fuel report pursuant to section 43-4-217 (7); (e) Any retail marijuana excise tax return required to be filed and payment required to be made pursuant to section 39-28.8-304; (f) Any retail marijuana sales tax return required to be filed and payment required to be paid pursuant to section 39-28.8-202; (g) Any remittance of wage withholding required to be made pursuant to section 39-22-604 by an employer whose annual estimated wage withholding tax liability exceeds fifty thousand dollars; (h) Any cigarette excise tax return required to be filed and payment required to be made pursuant to article 28 of this title 39; (i) Any tobacco products excise tax return required to be filed and payment required to be made pursuant to article 28.5 of this title 39; (j) Any nicotine products tax return required to be filed and payment required to be paid pursuant to article 28.6 of this title 39; (k) Any clean fleet per ride fee and air pollution mitigation per ride fee return required to be filed and payment required pursuant to section 40-10.1-607.5; (l) Any quarterly report for the advance payment of an income tax credit required to be filed pursuant to section 39-22-629 (2)(b); (m) Any production fee for wildlife and land remediation and production fee for clean transit return required to be filed and payment required to be made pursuant to article 61 of title 33 and section 43-4-1204; (n) The information return from long-term care employers required to be filed pursuant to section 39-22-566 (5); and (o) Any firearms and ammunition excise tax return required to be filed and any payment of tax required to be remitted pursuant to article 37 of this title 39. (5) (a) If any person fails or refuses to file a return electronically as specified in this section, the department shall collect a penalty of fifty dollars for such failure or five percent of the proper amount of tax on such return, whichever is greater. (b) If any person fails to pay by electronic funds transfer any tax or fee, including any addition to tax, due to the executive director as specified in this section, the department shall collect a penalty of fifty dollars for such failure or five percent of the proper amount of tax on such return, whichever is greater. (c) As used in subsections (5)(a) and (5)(b) of this section, tax means the net amount of tax shown to be due on the return filed by the taxpayer and reduced by the amount of any credit against the tax which may be claimed on the return. If the penalties provided for in subsections (5)(a) and (5)(b) of this section both apply, only the larger of the two penalties may be assessed. (d) (I) Any tax preparer preparing a tax return shall be required to file returns electronically and pay any tax or fee by electronic funds transfers if the taxpayer is required to do so pursuant to this section. (II) A penalty assessed against the taxpayer pursuant to subsection (5)(a) or (5)(b) of this section must be assessed against the taxpayer and may not be assessed against the tax preparer. (e) A penalty assessed against the taxpayer pursuant to subsection (5)(a) or (5)(b) of this section are assessed, collected, and paid in the same manner as the tax or fee to which such penalty relates. (f) The executive director may waive for good cause shown any penalty assessed pursuant to this subsection (5). (6) (a) Any person who is required to file returns electronically or make the payment of any tax or fee by electronic funds transfer pursuant to this section may apply to the executive director, on a form prescribed by the department, for an annual waiver from the requirements set forth in this section. The executive director may grant a request for a waiver, and may grant a renewal request for one subsequent year, if any of the following apply: (I) The taxpayer does not have a computer; (II) The taxpayer does not have internet access; or (III) The taxpayer shows good cause for why the filing of returns electronically or making the payment of any tax or fee by electronic funds transfer would cause undue hardship. (b) The executive director may waive the requirement to file returns electronically if the return cannot be filed electronically for reasons beyond the taxpayer's control, including situations in which the taxpayer is instructed by either the internal revenue service or the department to file by paper. (c) The executive director shall not require any taxpayer required to remit a tax by electronic funds transfers to remit the tax prior to the deadline specified for taxpayers who remit the tax by other means; except that the executive director may require a taxpayer to remit a tax by electronic funds transfers at an earlier hour on the day of the deadline for making a return and paying the tax due than taxpayers who remit the tax by other means. (7) (a) In order to induce the electronic payment of taxes and fees administered under section 39-21-102, the executive director may deduct processing costs from the payment in lieu of imposing a convenience fee, and if the processing costs are deducted from the payment, the executive director shall credit the full amount of the payment collected to the taxpayer's account. Processing costs may be deducted by the executive director under this subsection (7) regardless of if electronic payment is mandated under this section. (b) Notwithstanding any provision to the contrary, if the executive director deducts processing costs pursuant to this subsection (7), the state treasurer shall credit the full amount of the payment collected less the deducted processing costs to the appropriate fund. (c) If the executive director is required to distribute payment to a local government, the executive director shall deduct the processing costs from state revenue and shall not reduce the amount distributed to the local government. (d) As used in this subsection (7): (I) Convenience fee means the convenience fee that a state governmental entity is authorized to impose on a person that uses alternative forms of payment under section 24-19.5-103 (3). (II) Processing costs means the actual costs incurred by the department to process a transaction by an alternative form of payment for which the department is authorized to impose a convenience fee. Source: L. 2019: Entire section added, (HB 19-1256), ch. 395, p. 3510, § 1, effective August 2. L. 2020: (2)(s) amended, (HB 20-1293), ch. 267, p. 1298, § 15, effective July 10; (2)(c) and (4)(e) amended, (2)(j) and (2)(k) repealed, and (4)(g), (4)(h), and (4)(i) added, (HB 20-1175), ch. 88, p. 355, § 2, effective September 14; (1), (4)(e), and (4)(f) amended and (4)(j) added, (HB 20-1427), ch. 248, p. 1211, § 24, effective January 1, 2021. L. 2021: (2)(i), (2)(s), (2)(t), (4)(d), (4)(i), and (4)(j) amended and (2)(u) and (4)(k) added, (SB 21-260), ch. 250, p. 1401, § 13, effective June 17; (4)(d) amended, (HB 21-1322), ch. 453, p. 3020, § 12, effective January 1, 2022. L. 2022: (7) added, (SB 22-006), ch. 160, p. 1006, § 2, effective August 10. L. 2023: (2)(a)(III), (2)(a)(IV), (4)(j), and (4)(k) amended and (2)(a)(V) and (4)(l) added, (HB 23-1272), ch. 167, p. 816, § 23, effective May 11; (2)(a)(II) and (2)(a)(IV) amended, (HB 23-1277), ch. 290, p. 1755, § 6, effective January 1, 2024. L. 2024: (4)(k) and (4)(l) amended and (4)(m) added, (SB 24-230), ch. 184, p. 1024, § 10, effective May 16; (4)(k) and (4)(l) amended and (4)(n) added, (HB 24-1312), ch. 294, p. 2006, § 2, effective August 7; (1), (4)(k), and (4)(l) amended and (4)(o) added, (HB 24-1349), ch. 423, p. 2905, § 17, effective December 17 (see editor's note). L. 2025: (2)(t) amended, (HB 25-1154), ch. 230, p. 1087, § 29, effective January 1, 2026. Editor's note: (1) Section 27(2) of chapter 248 (HB 20-1427), Session Laws of Colorado 2020, provides that changes to this section take effect on the date of the governor's proclamation or January 1, 2021, whichever is later, only if, at the November 2020 statewide election, a majority of voters approve the ballot issue referred in accordance with section 39-28-401. The ballot issue, referred to the voters as proposition EE, was approved on November 3, 2020, and was proclaimed by the Governor on December 31, 2020. The vote count for the measure was as follows: FOR: 2,134,608 AGAINST: 1,025,182 (2) Amendments to subsection (4)(d) by HB 21-1322 and SB 21-260 were harmonized, effective January 1, 2022. (3) Amendments to subsection (2)(a)(IV) by HB 23-1272 and HB 23-1277 were harmonized, effective January 1, 2024. (4) Subsections (4)(k) and (4)(l) were amended in HB 24-1349. Those amendments were superseded by the amendment of those subsections in HB 24-1312 and SB 24-230. (5) Section 19(1) of chapter 423 (HB 24-1349), Session Laws of Colorado 2024, provides that the act changing this section takes effect on the date of the official declaration of the vote thereon by the governor only if, at the November 2024 statewide election, a majority of voters approve the ballot issue referred in accordance with § 39-37-201. The ballot issue, referred to the voters as Proposition KK, was approved on November 5, 2024, and was proclaimed by the Governor on December 17, 2024, see L. 2025, p. 3636. The vote count for the measure was as follows: FOR: 1,675,123 AGAINST: 1,406,112 Cross references: For the legislative declaration in SB 21-260, see section 1 of chapter 250, Session Laws of Colorado 2021. For the legislative declaration in SB 22-006, see section 1 of chapter 160, Session Laws of Colorado 2022. For the legislative declaration in HB 23-1272, see section 1 of chapter 167, Session Laws of Colorado 2023.