Regulatory and Industry News Alerts from Armanino

Chicago and Colorado “Home Rule” Cities Enact Economic Nexus Regimes

by Malcolm Ellerbe
June 15, 2021

Florida and Missouri recently adopted Wayfair economic nexus statutes, ending their status as the only two states who had yet to adopt online sales and use tax laws post Wayfair. But some local jurisdictions in various states administer their own taxes independent of the state and have moved to enact their own Wayfair economic nexus provisions.

Chicago and several Colorado “home rule” cities are the initial entrants into local Wayfair economic thresholds. This is especially relevant in Illinois and Colorado, which do not tax software as a service (SaaS) at the state level but in some cases do at the local level (e.g., Chicago, Denver).


On January 21, 2021, Chicago released its Information Bulletin – Nexus and Safe Harbor, providing a safe harbor for remote sellers with revenues under $100,000 from Chicago customers during the most recent consecutive four quarters, effective July 1, 2021. The safe harbor applies to an entity with no other significant contacts with Chicago.

Chicago administers its own sales and use taxes independently of the state of Illinois (also known as a home rule local jurisdiction). Effectively, Chicago has enacted its own Wayfair economic nexus standard.

The safe harbor pertains specifically to the city’s personal property lease transaction tax as applied to nonpossessory computer leases (which includes SaaS) and the amusement tax, which is applied to amusements delivered electronically, such as video streaming, audio streaming and online games (also known as digital goods). The $100,000 threshold applies to Chicago-sourced sales.


Colorado has an economic nexus threshold of $100,000 in retail sales, but until recently, a seller was not required to collect local level tax on sales delivered into a home rule jurisdiction unless it had physical presence in that jurisdiction. Numerous Colorado municipalities administer their own taxes. Title 30 of the Colorado Constitution grants municipalities with a population greater than 2,000 the power to self-govern. Currently, there are over 70 self-governing municipalities in Colorado, including Denver.

The Model Ordinance on Economic Nexus and Marketplace Facilitators (Model Ordinance) adopted by the Colorado Municipal League (CML) empowers Colorado home rule jurisdictions to impose local sales tax collection duties on remote sellers and marketplace facilitators exceeding an annual sales threshold into the state of $100,000 per year (the Colorado state threshold, in contrast to Chicago’s $100,000 threshold on Chicago-sourced sales). The CML's Model Ordinance is designed to establish a uniform economic nexus standard at the local level.

As more home rule cities choose to participate in the Colorado Department of Revenue’s Sales and Use Tax System (SUTS), established in June 2020, they will effectively have opted in to the uniform economic nexus threshold. Approximately 40 self-collecting home rule jurisdictions have adopted the Model Ordinance, including Colorado Springs, Denver and Fort Collins.


Illinois and Colorado do not tax SaaS. However, Chicago and several home rule Colorado cities (including Denver) do. SaaS companies should consider this when evaluating their multi-jurisdictional nexus posture and when calculating prior period liability calculations or setting up ongoing compliance infrastructure.

The state and local tax nexus landscape continues to change rapidly. Remote sellers with questions about compliance should speak to their tax advisors about how to diligently track and comply with these new provisions.

For assistance or to learn more, contact our experts.

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