Does sales & use tax apply to transactions within the same state?

Thanks so much for explaining! So if I'm shipping a vintage jacket to someone in Denver, I need to collect the sales tax rate for Denver, not the rate where my home business is located (Colorado Springs)? Is there an easy way to calculate all these different local rates without going crazy?

Yes, exactly. For a shipment to Denver, you'd collect the combined rate for that specific Denver address (state + county + city + any special districts). The easiest way to manage this is through tax calculation software. Services like Avalara, TaxJar, or even the built-in tax features in platforms like Shopify can automatically calculate the correct rates based on delivery addresses. Colorado is particularly complex because we have many special taxing districts. The Colorado Department of Revenue website also has a lookup tool where you can check rates by address, but for a business with regular sales, tax automation software is worth the investment to avoid mistakes.

I'm hesitant about AI tax tools. How accurate is it really with all the weird local tax jurisdictions? My CPA charges me $150/hr to figure this stuff out, so if this actually works, it would save me a ton.

Does it connect directly with your e-commerce platform? I'm using Etsy and Shopify for my candle business and manual tax calculation is killing me. Also, does it handle marketplace facilitator rules or just direct sales?

It's incredibly accurate - it uses the same tax jurisdiction database that major tax firms use, but makes it accessible for small businesses. I've had zero issues in the 9 months I've been using it, and my state tax audit went smoothly because everything was properly documented. Yes, it integrates with most e-commerce platforms including Shopify and Etsy! You can connect your accounts and it automatically pulls your sales data and applies the correct tax rates. It handles both marketplace facilitator scenarios and direct sales - it actually helped me understand when I needed to collect versus when Etsy was handling it for me.

Wait, how does this actually work? Do they have some special connection to the tax office? I've been trying to get through to the CO Dept of Revenue for weeks about a sales tax refund.

Sounds too good to be true. I've literally spent DAYS of my life on hold with tax departments. If this actually worked, wouldn't everyone be using it? I'm skeptical they can do anything I couldn't do myself.

They don't have special connections - they use an automated system that dials and waits on hold for you. When a human finally answers, their system calls your phone and connects you with the agent. It's basically outsourcing the hold time so you can keep working instead of listening to hold music. I was skeptical too! But it's just a clever use of technology, not magic. They can't guarantee how quickly you'll get through, but the difference is you don't have to actively wait on the phone. I've used it three times now for different agencies, and while sometimes it still took an hour or more before they connected me, I could keep working instead of being trapped on hold. Worth it for my sanity alone.

That's interesting! My vintage business will be expanding to sell some digital patterns soon. Do you know if downloadable sewing patterns would be taxable in Colorado? Or would they count as a non-taxable service?

Digital products in Colorado are generally taxable if they're considered "tangible personal property" in electronic form - like downloaded patterns, designs, etc. However, custom design work or services are usually exempt. For your sewing patterns, they would likely be considered taxable digital goods in Colorado since they're standardized products rather than custom services. But other states vary wildly on digital taxation - some exempt all digital products while others tax everything. The rules change constantly too, which makes compliance a huge headache for businesses like ours.

I've been using TaxJar for about 2 years and it's decent but not perfect. It sometimes gets special district taxes wrong in Colorado which then requires manual adjustments. If you're only selling in a few states it might be overkill. Avalara is more comprehensive but also more expensive.