Good News on FUTA and Sales Taxes!

SKR+Co Tax Alert

Good News on FUTA and State Sales Taxes!

June 8, 2011 

Two positive changes are coming to Colorado employers and retail businesses on July 1, 2011: the FUTA tax rate decreases and the state sales tax service fee is restored.

FUTA Tax Rate Decreases

If you are an employer, you should be aware that the Federal Unemployment Tax Act (FUTA) tax rate is decreasing effective July 1, 2011.

FUTA-covered employers currently are assessed a tax amounting to 6.2% on the first $7,000 of wages paid to each employee during a calendar year. 

Generally, employers can take a credit against their FUTA tax for amounts paid into state unemployment funds. The credit may be as much as 5.4% of FUTA taxable wages. If an employer is entitled to the maximum 5.4% credit, the FUTA tax rate after credit is currently 0.8%.

On July 1, 2011, the FUTA tax rate is scheduled to decrease to 6.0%.  For employers who can take the maximum credit of 5.4%, the FUTA tax rate will decrease to 0.6%.

State Sales Tax Service Fee is Restored

The Colorado state sales tax Service Fee (also known as the Vendor's Fee) has been restored and the rate is now 2.22%. The fee may be claimed on timely filed and paid sales tax returns submitted on or after July 1, 2011 beginning with sales tax returns for June 2011 and 2nd quarter 2011 due on July 20, 2011.

Businesses with only one location will receive new DR 0100 coupon books in early July. If the new booklet does not arrive in time to prepare and file the return, change the state and district column vendor fee rates on the existing coupon to 2.22% (.0222).

Multiple location retailers, seasonal filers, and annual filers will receive pre-printed forms that will have the 2.22% rate. XML or Excel spreadsheet filers need to verify that their rate for state, RTD/CD/FD/BD has been changed to reflect the service fee change for the June 2011 or 2nd quarter 2011 returns due on July 20, 2011.

What action, if any, do you need to take?

For the FUTA Tax Rate Decrease:

 Check with your bookkeeping software company to make sure they have updated their software with these changes. Also, track FUTA taxable wages paid before July 1 separately from those paid after June 30, just in case the surtax gets extended.

For the State Sales Tax Service Fee:

File and pay your sales tax return on time, in order to get the fee. Use the new coupon book you will receive or make sure the change is reflected on the reporting paperwork you use.

Additional Information 

Click Here to find out if you are subject to FUTA taxes, how you qualify for the credit, and more. 

Click Here to read to what taxes the state sales tax Service Fee applies, as well as other information related to the fee.