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A Summary of the New Colorado Retail Delivery Fee

By: Michael Maguire |

Effective July 1, 2022, Colorado will impose a $0.27 Retail Delivery Fee on all deliveries by motor vehicle to a location in Colorado with at least one item of tangible personal property subject to state sales or use tax. The Retail Delivery Fee will be adjusted for inflation in future years.

The Retail Delivery Fee is calculated per sale. If every item in a retail sale is exempt from sales tax, the delivery is also exempt from the Retail Delivery Fee.  However, if one or more items in the transaction are subject to sales tax, the Retail Delivery Fee is due.  Each sale for delivery is considered a single “retail delivery” regardless of how many shipments are needed to deliver the items purchased.

The Retail Delivery Fee is imposed on the purchaser of the item, but the retailer who sold the personal tangible property is required to collect the fee from the purchaser and remit it to the Colorado Department of Revenue. The Retail Delivery Fee must be included on the invoice or receipt issued to the purchaser, and it must be listed as a separate item called “retail delivery fees.”

The Retail Delivery Fee applies to deliveries made by third parties, as well as orders with free shipping.

The Retail Delivery Fee does not apply to retail sales of tangible personal property for delivery by a motor vehicle to a purchaser outside of Colorado.  However, the Retail Delivery Fee does apply to deliveries by motor vehicle from another state to a location in Colorado.

Wholesale sales are not subject to the retail delivery fee as they are generally exempt from the sales tax.  If, however, the delivery includes both items for resale (i.e., wholesale sales) and goods subject to state sales or use tax, then the retailer must collect the Retail Delivery Fee.  Also, the fee does not apply when otherwise taxable goods are delivered to a purchaser exempt from the state sales tax, such as a government or charitable organization.

Collecting the Retail Delivery Fee and Filing Returns

The Retail Delivery Fee is due at the same time as the sales tax return is filed.  However, the Retail Delivery Fee is reported on a separate return.  Returns are generally filed monthly and must be filed on or before the 20th day of the month following each reporting period.  Retailers who are permitted to file state sales tax returns on a quarterly, annual, or other basis will file the Retail Delivery Fee return on the same schedule.

The Retail Delivery Fee will be reported and paid on a new return, the DR 1786 Form.  The Retail Delivery Fee is collected on a state-wide basis, and it does not need to be separated by jurisdiction. Thus, the retailer can file one return for the entire state, and electronic filing and payment is available.

For fees paid in error on items not subject to the tax, the retailer may claim a credit on their current return against the amount owed by entering the amount of overpayment on the “credits allowed” line.

Account Registration

Retailers with an active sales tax account, a retailer license, and any sales tax liability reported after January 1, 2021, will automatically be registered for a Retail Delivery Fee account by July 1, 2022.  This applies to both in-state business retailers and out-of-state business retailers.

After July 1, 2022, retailers will need to separately register for a Retail Delivery Fee account when registering for a sales tax account.

Conclusion

Colorado is introducing a Retail Delivery Fee which will impact all sellers who deliver taxable tangible personal property to purchasers in Colorado that are delivered by motor vehicle. Impacted sellers will now have an additional tax return to file in Colorado, as well as an additional item to include on invoices. 

If you have questions about any of the information in this True Alert, please contact a member of your TPC engagement team.