Signed into law on Dec. 7, 2020, by Colorado Governor Jared Polis, HB20B-1004 formalizes and expands the temporary Colorado state sales tax relief for restaurants, bars, and mobile food service vendors originally provided on November 25 by Executive Order D 2020 261.
A qualifying retailer in the restaurant, alcoholic beverage, and mobile food service industries is allowed a deduction of up to $70,000 in state net taxable sales per location, food truck, or cart. State tax collected on eligible sales may be retained indefinitely by the retailer. The deduction applies for sales made during November and December 2020 and January and February 2021 for up to a maximum of five locations plus up to five mobile food trucks or carts. As additional qualifications, the retailer must timely file sales tax returns on a monthly basis and timely remit all remaining state sales tax, as well as all state-administered local sales taxes.
It’s important to note that the deduction is neither applicable to any other sales taxes (e.g. RTD, SCFD, statutory city, and counties) that are collected by Colorado nor any Colorado home-rule jurisdictions that separately administer sales tax.
The Colorado Department of Revenue has provided instructions for both the restaurant and bar special sales tax deduction and the mobile food vendor special sales tax deduction. Anticipated savings is estimated to be about $2,000 per location per month. However, income tax considerations, including those under Internal Revenue Code Section 118, may ultimately reduce the cash savings overall. Please consult with your tax advisor for additional guidance.