Colorado Retail Sale Tax and Fee Update 2022

Heads up – all authors that sell books and other taxable merchandise. Colorado’s destination sourcing rules now apply to all retail sales. The small business exemption of $100,000 or less in annual sales expired September 30, 2022. The author’s place of business is no longer the source of charging and collecting local and state sales tax. Destination sourcing’s sales tax is the location where the product is delivered. The way the product gets to its destination doesn’t matter.

Colorado has over 700 sales tax jurisdictions in the state. How does a retailer know what to charge? The retailer uses the state’s Geographic Information System (GIS). The look-up system is free to use. The state updates the rates regularly. Here’s the link to the lookup tool.

https://tax.colorado.gov/how-to-look-up-sales-use-tax-rates

One of the reasons complying with Colorado’s myriad sales tax laws is so difficult relates to our love of independence from state overreach. In the municipal government arena, seventy-one (71) communities assess and collect their own sales tax. The retail community faced challenges in complying and remitting sales taxes for decades since each community had its own rules. To address retailers concerns, the business community, the home rule municipalities, and the state teamed up to create the State’s Sales and Use Tax System. (SUTS).The goal of SUTS is to have one place the retailer files and remits the sales tax due in one location.

As of September 30, 2022, 58 home rule cities participate in the SUTS system. See the link to the DOR list of participating cities here. https://tax.colorado.gov/SUTS-Jurisdictions. If a retailer delivers into the remaining 13 home rule municipalities, separate filings and remittances are required.

Colorado’s Retail Delivery Fee (RDF) became effective July 1, 2022. The RDF is $.27/sale. The fee is charged once per sale. The Colorado Department of Revenue’s (DOR) regulation apply the RDF to products delivered by the United States Postal Service (USPS). The fee needs to be separately stated on the invoice.

Some home rule cities consider the fee as part of the taxable sale calculation and require the retailer to charge sales tax on the fee. Retailers pushed back on adding the fee to taxable goods. Some home rule communities are in the process of modifying their ordinances to exclude the fee from taxation. Right now, the vendor cannot absorb the RDF. Remit the RDF on a new form, DR 1786. The due date follows the state filing timeline. DOR is working on having the RDF remitted through the SUTS system by the end of the year.

 

By Pam Feely, CIPA Treasurer