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New Colorado retail delivery fee: What does it mean for taxpayers?

August 16, 2022 Article 3 min read
Authors:
Ron Cook Jeanette Tolar David Landwehr

As of July 1, a “retail delivery fee” has been imposed in Colorado. Our Colorado tax experts discuss what types of deliveries are subject to the fee and what retailers need to know about registering for, collecting, and remitting it. 

Close-up view of a workers hands using a calculator.Effective July 1, 2022, Colorado imposes a retail delivery fee of 27 cents (the fee) on each retail sale delivered by motor vehicle to Colorado customers. The fee is imposed on each order delivered by motor vehicle if an item included in the order is also subject to Colorado sales tax. Every retailer who makes a retail sale delivered by motor vehicle is liable and responsible for the payment of the fee; retailers can collect the fee from the purchaser, similar to a sales tax. The fee rate will be adjusted annually for inflation.

What types of deliveries are subject to the retail delivery fee?

Retailers must collect the fee whether the delivery originates from out-of-state or in-state retailers. Deliveries that don’t include any tangible personal property subject to sales tax aren’t subject to the fee. Exempt deliveries include sales for resale or wholesale, sales to exempt entities, and items delivered electronically, such as digital goods. If the sale includes both taxable and exempt items, the fee applies. Even if the retailer uses third parties to deliver the goods, the fee applies, including transactions where shipping is free. If the retailer ships goods through multiple deliveries or if payment for one sale is made through multiple installments, the fee applies once per sale that includes a retail delivery.

How do retailers register for, collect, and remit the retail delivery fee?

Retailers that currently have a sales tax account are automatically registered for the fee. After July 1, 2022, new retailers will need to register for the fee either online (on the sales tax account registration (Form CR 0100AP)) or by filing an initial retail delivery fee return (Form DR 1786).

The business required to collect sales tax also collects the fee. Retailers will display the fee as a separate line item on each invoice as “retail delivery fees.” Marketplace facilitators — such as Amazon, eBay, or Etsy — that collect sales tax on behalf of their marketplace sellers are also required to collect and remit the fee on behalf of their marketplace sellers.

There is a new form separate from the sales tax return, Form DR 1786, to remit the fee. Retailers can also remit the fee through state government web portals such as Colorado Revenue Online or the Colorado Sales and Use Tax System (SUTS). The fee is due at the same time and frequency as the retailer’s sales tax return (either monthly, quarterly, or annual) and is due on or before the 20th day of the month following each reporting period. One return is required per taxpayer per filing period, and a return is required for each period regardless if any fee is due.

While working to update systems, retailers can pay the fee directly rather than collecting it from customers, but they should avoid invoice language around “absorption” of the fee.

What else do I need to know about the retail delivery fee?

The state of Colorado administers the fee. Colorado home-rule jurisdictions don’t impose a similar fee at this time, and it’s yet to be seen if home-rule jurisdictions will impose sales tax on the fee. The state of Colorado doesn’t impose sales tax on the fee. Some home-rule jurisdictions may impose sales tax on the fee, while others may not.

As the fee is remitted on a separate form than the sales tax return, retailers should be diligent in collecting and remitting the fee as soon as possible to begin the statute of limitations. There is no statute of limitations if the retailer doesn’t file a return.

Retailers should ensure their online sales platform, such as Shopify, includes the fee on its invoices. Retailers using third-party sales tax collection and remittance services should contact their providers to confirm the fee is collected as part of their sales tax compliance services.

What’s next for the retail delivery fee?

Colorado is the first state to administer a retail delivery fee tied to sales tax collections. As states continue to address environmental and infrastructure concerns, we can expect states to consider a variety of fees and taxes to fund greener initiatives, including retail delivery fees.

If you have any additional questions on the retail delivery fee and how it may affect you, please don’t hesitate to reach out to one of our Colorado state and local tax specialists.

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