Colorado Sales Tax Handbook

RATE OF SALES TAX:

2.90%

LOCAL & COUNTY MAXIMUM RATES:

8.30%

What Are the Taxable Goods and Services?

The first step in sales tax compliance is determining if the items or services your firm offers are taxable in Colorado.

Traditional Products and Services

Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in Colorado.

Groceries, prescription medications, and fuel are all tax-free purchases.

Some Colorado services are subject to sales tax. View the Colorado Department of Revenue website for a complete list of taxable services.

In addition, the Colorado Department of Revenue has issued a detailed reference on sales tax exemptions and exclusions.

Digital Products and Services

A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.

Businesses in Colorado are required to collect sales tax on the sale of digital products or services.

How to Register for Sales Tax in Colorado

If you’ve decided that you must charge sales tax on part or all of the items and services your company offers, the next step is to apply for a seller’s licence.

This enables your company to collect sales tax on behalf of the municipal and state governments.

You will need the following information to register:

Data on personal identity
Identification information for a business
Products that you offer as a business entity

Even if you don’t have any sales tax to report or pay, Colorado mandates that every seller with a sales tax permit submit a sales tax return on the due date.

A Resale Certificate might help you save money.

When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.

Sales Tax Collection

After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.

When computing sales tax, consider the following types of transactions:

Store Sales Shipping Within-State Sales Outside-State Sales

Retail Sales

For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location.

Here’s an illustration of how this situation may look:

In Fort Collins, Colorado, Mary owns and operates a bookshop. Because books are taxed in Colorado, Mary charges her clients a 7.400% flat-rate sales tax on all transactions. This includes Colorado’s 2.9% sales tax, Larimer County’s 0.650% sales tax, and Fort Collins’ local district tax rate of 3.850%.

Shipping inside the state

When delivering to consumers in Colorado, your tax rate will be determined by the county and municipal tax districts that your company and the client share. The three instances below demonstrate this concept:

Delivery to a Customer in Your City

You will be responsible for collecting state, county, and municipal sales tax when shipping to clients in the same city and county as your company.

Shipment to a Customer in Your State

You will be responsible for collecting state and county sales tax when delivering to clients in a different city but within the same county as your company. You will not be liable for collecting municipal sales tax on your clients’ behalf.

Shipping to a Customer Who Lives Outside of Your City and County

When delivering to consumers outside of your city and county, you must only collect sales tax at Colorado’s base tax rate. You will not be liable for collecting sales tax on behalf of your consumers in the county or city.

Out-of-State Purchases

Colorado firms must only pay sales tax on out-of-state sales if they have a presence in other states.

Nexus indicates that the company has a physical presence in another state.

Common nexus types include:

A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.

Submit Your Sales Tax Return

You’re ready to submit your sales tax return now that you’ve obtained your Colorado seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.

How to File a Claim

Businesses in Colorado are required to file sales tax forms and make sales tax payments online.

Apply for Local Sales Tax

Businesses in most states pay all sales tax revenues to the state, and any district level taxes are dispersed to counties and cities.

Colorado is not like the rest of the states. In Colorado, counties and towns have the option of having companies pay local sales taxes to a governing body. These counties and cities are referred to as “Self Collecting” jurisdictions. The Colorado Department of Revenue sales tax spreadsheet has a complete list of “Self Collecting” jurisdictions in Colorado.

How Frequently Should You File?

Annual filing: If your company receives less than $15.00 in sales tax each month, you must submit returns on an annual basis.
Quarterly filing: If your company receives between $15.00 and $300.00 in sales tax each month, you need submit quarterly reports.
Monthly filing: If your company receives more than $300.00 in sales tax each month, you must submit monthly returns.

Deadlines for Filing

The deadline for all Colorado sales tax returns is the 20th of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day. The filing deadlines for this year are shown below.

Penalties for Filing Late

Colorado levies a 10% sales tax + 0.5% every month. This penalty might be up to 18.00% of the total tax owed.