2023 Colorado Revised Statutes › Title 29 - GOVERNMENT - LOCAL (§§ 29-1-101 — 29-37-210) › GENERAL PROVISIONS (§§ 29-1-101 — 29-3.5-102) › Article 2 - County and Municipal Sales or Use Tax (§§ 29-2-101 — 29-2-302) › Part 3 - DISPUTE RESOLUTION FOR SALES OR USE TAX SELF-COLLECTED BY LOCAL GOVERNMENTS (§§ 29-2-301 — 29-2-302) › Section 29-2-302 - [Effective 7/1/2025] Deficiency notice - dispute resolution

(1)
The general assembly hereby finds, determines, and declares that the enforcement of sales or use taxes can affect persons and entities across the jurisdictional boundaries of taxing jurisdictions and that dispute resolution is a matter of statewide concern for which the procedures set forth in this part 3 must be applied uniformly throughout the state.In fact, the Colorado supreme court relied on this declaration in Walgreen Co. v. Charnes, 819 p.2d 1039 (Colo. 1991), to hold that appeals taken from locally imposed and collected sales or use taxes, including those imposed and collected by a home rule jurisdiction, are governed by the procedures that have been relocated to this part 3.
(2)
(a)
When a local government asserts that sales or use taxes are due in an amount greater than the amount paid by a taxpayer, the local government shall mail a deficiency notice to the taxpayer . The deficiency notice must state the additional local sales or use taxes due. The deficiency notice must contain notification, in clear and conspicuous type, of the time limit to file a protest to the notice and that the taxpayer has the right to elect a hearing on the deficiency pursuant to subsection (3) of this section. Any protest to the deficiency notice must be filed with the local government within thirty days after the date of the notice.
(b)
The taxpayer shall also have the right to elect a hearing pursuant to subsection (3) of this section on a local government's denial of the taxpayer's claim for a refund of sales or use tax paid.
(c)
The taxpayer shall request the hearing pursuant to subsection (3) of this section within thirty days after the taxpayer's exhaustion of local remedies. For purposes of this subsection (2)(c), "exhaustion of local remedies" means that one of the following events has occurred:
(I)
The taxpayer has timely requested in writing a hearing before the local government, and the local government has held the hearing and issued a final decision. The hearing, if any, must be held and any decision must be issued within one hundred eighty days after the taxpayer's written request for hearing or within any additional time that the taxpayer andthe local government may agree upon in writing.
(II)
The taxpayer and local government agree in writing that no hearing before the local government will be held, or that the local government will not issue a final decision.The written agreement must state that the taxpayer exhausted local remedies in accordance with this section, must identify the date of the exhaustion, and must advise the taxpayer of the right to pursue further review pursuant to subsection (3) or (8) of this section within thirty days after the exhaustion.
(III)
One hundred eighty days or more after the date of the taxpayer's request for a hearing, the local government notifies the taxpayer in writing that the local government does not intend to conduct a hearing. In such instance, the written notification must also state that the taxpayer exhausted local remedies in accordance with this section, that the exhaustion occurred on the date of the written notification, and that the taxpayer may pursue further review pursuant to subsection (3) or (8) of this section within thirty days after the exhaustion.
(d)
If the taxpayer has timely requested in writing a hearing before the local government and none of the events described in subsection (2)(c) of this sectionhave occurred, the taxpayer may request a hearing pursuant to subsection (3) of this section at any time after the period prescribed in subsection (2)(c)(I) of this section.
(e)
Any hearing before a local government is informal and no transcript, rules of evidence, or filing of briefs is required; but the taxpayer may elect to submit a brief, in which case the local government may submit a brief.By agreement of all parties to the hearing, the hearing may be canceled and the matter may be determined by the local government official upon written briefs submitted by the parties in the same manner as provided in section 39-21-103 (7) and (8).
(3)
(a)
If a taxpayer satisfies the requirements of subsection (2)(c) of this section, the taxpayer may requestthat the executive director conduct a hearing on the deficiency notice or claim for refund, and if requested, the hearing must be conducted in the same manner as set forth in section
39-21-103
. Any local government to which the deficiency notice being appealed claims taxes are due, or, in the case of a claim for refund, the local government that denied the claim, must be notified by the executive director that a hearing is scheduled and must be allowed to participate in the hearing as a party.
(b)
(I)
Except as provided in subsection (3)(b)(II), if the taxpayer requests a hearing before the executive director, then the local government whose decision is being appealed may not require a bond or payment of tax in lieu thereof;
(II)
The local government may require a bond or payment of tax in lieu thereof filed with and payable to the local government in the manner provided in section
39-21-111
prior to the hearing before the local government or the executive director if either:
(A)
The local government reasonably finds that collection of the tax will be jeopardized by delay; or
(B)
The taxpayer requests a postponement of the hearing before the local government or the executive director, unless the taxpayer can show that the postponement is necessary due to a death, physical illness or injury, or catastrophe, which substantially impairs the taxpayer's ability to present their case.
(III)
If that payment of the tax or posting of a bond is required by the local governmentpursuant to subsection (3)(b)(II) of this section, the taxpayer, after payment of the tax or posting of the bond, may appeal the local government's decision regarding the deficiency notice or claim for refund to the executive director andthe executive director shall grant an expedited hearing on the appeal pursuant to section
39-21-103 (6)
. The executive director may affirm, reverse, or modify the decisionregarding the deficiency notice or claim for refund.
(c)
If the taxpayer appeals the decision issued pursuant to this subsection (3) in the manner provided in section
39-21-105
, then the taxpayer shall pay the tax to or post a bond with the local government whose decision is being appealed in the manner provided in that section.
(d)
Any hearings before the executive director or the executive director's delegate must be de novo, without regard to the decision of the local government and the taxpayer has the burden of proof .
(4)
If all parties to a hearing arrive at a settlement prior to the hearing, the parties may agree to cancel the hearing.After canceling the hearing, no party has a furtherright to a hearing before the executive director on the deficiency notice or claim for refundand neither party may appeal the decision in the manner provided in section 39-21-105.
(5)
(a)
Except as provided in subsection (5)(d) of this section, if the taxpayer asserts that all or part of a sales or use tax which is the subject of the hearingpursuant to this part 3 has been paid to or is due to another local government, then such other local government shall be joined as a party to the hearing. Neither the taxpayer nor the assessing local government needs to file a claim for refund with such other local government in order to pursue the remedy provided by this subsection (5)(a). If the executive director determines that the disputed tax was paid, but to the wrong local government, then the taxpayer shall be relieved of the tax due up to the amount paid by the taxpayer to the wrong local government together with an abatement of interest thereon and all penalties;except that, the taxpayer is not entitled to the automatic abatement of interest and penalties described in this subsection (5)(a) for an error that would not have occurred if the taxpayer had used the GIS database described in section 39-26-105.2 to determine the tax rate and the jurisdictions to which the sales or use tax is due. Nothing in this subsection (5)(a) prohibits a local government from waiving interest or penalties for good cause shown.
(b)
Notwithstanding section 29-2-209, the periods open or closed to assessment or refund under the ordinances of the local governments, under sections
39-26-210
,
39-21-107 (1)
,
39-26-125
, and
39-26-703
, or under an intergovernmental transfer agreement may not bar any of the remedies set forth in subsections (5)(a) and (6) of this section.
(c)
(I)
If the taxpayer receives a notice from a local government that the taxpayer must pay sales or use tax to that local government for a particular taxable event and the taxpayer fails to comply with the instructions in the notice with respect to the same type of taxable event that occurs more than ninety days after the taxpayer receives the notice, then the taxpayer may not take advantage of the remedies allowed in subsection (5)(a) of this section for that particular type of taxable event identified in the notice that occurs more than ninety days after the taxpayer received the notice, unless the taxpayer receives, or has previously received, a similar notice described in subsection (5)(c)(II) of this section from another local government that provides contrary instructions.
(II)
The notice required in subsection (5)(c)(I) of this section must:
(A)
Be in writing and be signed by an appropriate local government official;
(B)
Be sent by certified or registered mail or be delivered by a nationally recognized courier service that provides a receipt upon delivery;
(C)
Instruct the taxpayer to pay sales or use tax on the particular type of taxable event identified in the notice to the local government; and
(D)
Include notice that failure to comply with the instructions will result in the taxpayer being denied the remedies allowed in subsection (5)(a) of this section for the particular type of taxable event identified in the notice that occurs more than ninety days after the taxpayer received the notice.
(d)
If all parties to a hearing described in this subsection (5) arrive at settlement prior to the hearing, the parties may agree in writing to cancel the hearing. A local government to which the taxpayer asserts it paid the sales or use tax in error may participate in a settlement conference and agreement described in this subsection (5)(d). After canceling the hearing, no party has a further right to a hearing before the executive director and neither party may appeal the decision in the manner provided in section 39-21-105.
(6)
(a)
If the amount paid exceeds the tax found to be due, then the government in receipt of the payment shall refund the overpayment to the taxpayer within thirty days of the executive director's decision, together with interest thereon from the date the taxpayer made the payment until the date the overpayment is refunded, unless a timely appeal is taken by the government pursuant to subsection (7) of this section. If the amount paid is found to be less than the taxes due, then the taxpayer shall pay the deficiency, less any amount paid in lieu of bond, to the appropriate local government within thirty days of the executive director's decision with interest from the date full payment was due until the date that the deficiency is paid, unless a timely appeal is taken by the taxpayer pursuant to subsection (7) of this section. A local government which is found to have erroneously received payment from the taxpayer shall forward such payment to the appropriate local government within thirty days of the executive director's decision with interest from the date the amount was received from the taxpayer until the date the amount was forwarded to the appropriate local government, unless a timely appeal is taken pursuant to subsection (7) of this section by a local government which is found to have erroneously received payment from the taxpayer.The executive director may affirm, reverse, or modify the decision regarding the deficiency notice or claim for refund.
(b)
All interest payable pursuant to this subsection (6) must be at the same rate that applies to deficiency payments.
(7)
Appeals from the final determination of the executive director may be taken in the same manner as provided in and are governed by section
39-21-105
, by any party bound by the executive director's decision. An appeal must be heard de novo and heard as provided in section
39-21-105
with the following provisions:
(a)
If the appellant is a local government, the taxpayer has the burden of proof as to all factual matters, and the appellant has the burden with respect to any legal determination of the executive director that the appellant seeks to reverse;
(b)
The local government always has the burden of proof with respect to the issue of whether the taxpayer has been guilty of fraud with intent to evade tax and with respect to the issue of whether the taxpayer is liable as a transferee of property of another taxpayer;
(c)
The local government does not have the burden of proof to show that the transferor taxpayer was liable for the tax; and
(d)
The executive director may, at the executive director's request, be a party to the appeal.
(8)
(a)
If a deficiency notice or claim for refund involves only one local government, in lieu of requesting a hearing pursuant to subsection (3) of this section, the taxpayer may appeal the deficiency or denial of a claim for refund to the district court.
(b)
The taxpayer shall appeal to the district court pursuant to this subsection (8) within thirty days after the taxpayer's exhaustion of local remedies. For purposes of this subsection (8), "exhaustion of local remedies" means that one of the following events has occurred:
(I)
The taxpayer has timely requested in writing a hearing before the local government, and the local government has held the hearing and issued a final decision. The hearing must be informal and no transcript, rules of evidence, or filing of briefs may be required; but the taxpayer may elect to submit a brief, in which case the local government may submit a brief. The hearing, if any, must be held and any decision thereon issued within one hundred eighty days of the taxpayer'swritten request for hearing or within such further time as the taxpayer and local government may agree upon in writing.
(II)
The taxpayer and local government agree in writing that no hearing before the local government will be held or that no final decision will issue from the local government. The written agreement must state that the taxpayer exhausted local remedies in accordance with this section, must identify the date of such exhaustion, and must advise the taxpayer of the right to pursue further review pursuant to subsection (3) of this section or this subsection (8) within thirty days after the exhaustion.
(III)
One hundred eighty days or more after the date of the taxpayer's request for a hearing, the local government notifies the taxpayer in writing that the local government does not intend to conduct a hearing. In such instance, the written notification must also state that the taxpayer exhausted local remedies in accordance with this section, that the exhaustion occurred on the date of the written notification, and that the taxpayer may pursue further review pursuant to subsection (3) of this section or this subsection (8) within thirty days after the exhaustion.
(c)
If the taxpayer has timely requested in writing a hearing before the local government and none of the events described in subsection (8)(b) of this section have occurred, the taxpayer may appeal such deficiency or denial of a claim for refund to the district court at any time after the period set forth in subsection (8)(b)(I) of this section.
(d)
An appeal pursuant to this subsection (8) must be conducted in the same manner as provided in section
39-21-105
; except that venue is in the district court of the county where the local government whose decision is being appealed is located, and any deposit made pursuant to section
39-21-105 (4), (5), or (8)(a)(III)
, must be made with the local government whose decision is being appealed.
(9)
In lieu of electing a hearing pursuant to this section on a notice of deficiency or claim for refund, a taxpayer may pursue judicial review of a local government's final decision thereon as otherwise provided in the local government's ordinance or resolution.
(10)
[Deleted by 2024 Amendment]
(11)
If any local government reasonably finds that the collection of the tax will be jeopardized by delay, it may utilize the procedures set forth in section
39-21-111
; however, the use of the procedures set forth in section 39-21-111 may not preclude the taxpayer from appealing to the executive director pursuant to subsection (3) of this section.
Renumbered from C.R.S. § 29-2-106.1 and amended by 2024 Ch. 144,§ 1, eff. 7/1/2025.
Amended by 2017 Ch. 144, § 1, eff. 4/18/2017.
Amended by 2016 Ch. 292, § 4, eff. 8/10/2016.
Amended by 2013 Ch. 316, § 90, eff. 8/7/2013.
L. 85: Entire section added, p. 1032, § 3, effective 1/1/1996. L. 2010: (2)(a) amended, (SB 10 -142), ch. 51, p. 194, § 1, effective August 11. L. 2011: (2)(c), (3)(a), and (8) amended and (2)(d) and (2)(e) added, (SB 11 -086), ch. 52, p. 135, § 1, effective July 1. L. 2013: (8)(d) amended, (HB 13-1300), ch. 316, p. 1692, § 90, effective August 7. L. 2016: (3)(b), (3)(c), and (8)(d) amended, (SB 16-036), ch. 292, p. 1182, § 4, effective August 10. L. 2017: (5) amended, (SB 17-112), ch. 144, p. 482, § 1, effective April 18.