A new retail delivery fee took effect in Colorado on July 1, 2022. Retailers will have to collect the $0.27 fee every time they deliver taxable goods to a Colorado address. This will add a layer of compliance complexity for both in-state and out-of-state retailers.
The $0.27 fee, which will be adjusted for inflation, applies to retailers selling taxable tangible goods for delivery by motor vehicle to Colorado consumers, no matter who owns or operates the vehicle used to make the delivery, and whether the delivery originates in Colorado or another state.
Given the number of Prime (and other) delivery trucks zipping around neighborhoods daily, this could be quite lucrative for the state. In fact, it’s expected to generate $16.8 million during fiscal year 2022–23 and $18.8 million in FY 2023–24. Serious online shoppers may feel it the most; though collected and remitted by retailers, the fee is imposed on purchasers.
Businesses subject to the new retail delivery fee — i.e., any retailer registered to make taxable retail sales in Colorado that makes sales for delivery — must register to collect and remit the fee. If you don’t make any sales of taxable tangible property for delivery into Colorado, you’re not required to register.
The Colorado Department of Revenue has confirmed that a person who does not have nexus and therefore does not meet the requirements to collect sales tax is also not required to collect the retail delivery fee.
There’s no license or registration fee, but retailers will need to add a retail delivery fee account through the Colorado Department of Revenue. Information on how to do that will be forthcoming.
Every retailer with a retail delivery fee account will need to separately report the fee on a retail delivery fee return (form DR 1786). Returns are due every reporting period, at the same time as the state sales tax return, even if no deliveries into the state were made during that time.
If there are any silver linings, it’s that only one return will be required for the entire state and electronic filing and payment options will be available.
Fee must be separately stated
Retailers must separately state the retail delivery fee on all customer invoices and receipts.
The fee doesn’t apply when otherwise taxable goods are delivered to a purchaser exempt from the state sales tax, such as a government or charitable organization.
Likewise, the fee doesn’t apply to deliveries of nontaxable goods, including wholesale sales, so long as all the property delivered is exempt from the state sales tax. If a delivery includes both taxable and exempt goods, the delivery fee will apply.
The retail delivery fee is just one of several new fees created by the enactment of Senate Bill 21-260. Others include:
“Funding highway and road construction and maintenance comes mostly from taxes on motor fuel and fees imposed on motor vehicle ownership,” says Scott Peterson, vice president of Government Relations at Avalara. “The tax on motor fuel isn’t a long-term option given the ever-increasing use of electric vehicles and miles per gallon. Many states are studying and talking about how to solve the problem, but Colorado may be the first state to broaden the revenue mix to provide long-term funding. The challenge is the administrative cost it imposes on the businesses that must collect the fees.”
Automating tax collection and remittance can help reduce the burden on businesses. If you currently use Avalara AvaTax and want to learn how it will support the Colorado retail fee, check out the Avalara Help Center.
An Aktion strategic software vendor, Avalara partners with Aktion to deliver cloud-based sales and use tax calculation systems to our Construction, Distribution and Manufacturing customers.