By: Brandon McCafferty, JD/MBA – Senior Manager
Effective July 1, 2022, Colorado imposed a novel retail delivery fee of $0.27 on all deliveries by motor vehicle of taxable tangible personal property in the state. Although the legislation authorizing the fee was enacted in 2021, the Colorado Department of Revenue (“Department”) did not issue draft guidance until May 2022 and did not conduct the required workgroup meeting until June 23, 2022. Unfortunately, this means that many taxpayers are scrambling to understand and comply with the recently enforced law.
Retailers and marketplace facilitators (collectively, “retailers”), both in-state and out-of-state, with an active sales tax account in Colorado were automatically registered for the retail delivery fee (“fee”) as of July 1. Otherwise, taxpayers can register for an account through Colorado Revenue Online. The first return for monthly filers will be on August 20, 2022, will be due on the same schedule as sales tax, but will be reported on a new tax form, DR 1786. Businesses who were automatically registered but do not make retail deliveries that require a return to be filed should not file any returns and the account will be automatically closed by February 28, 2023.
Delivery by Motor Vehicle
The law authorizing the fee, Colo. Rev. Stat. §43-4-218, states, in part, that “’Retail delivery’ means a retail sale of tangible personal property by a retailer for delivery by a motor vehicle owned or operated by the retailer or any other person to the purchaser at a location in this state, which sale includes at least one item of tangible personal property that is subject to taxation…” The Department’s FAQs section explains that this includes deliveries made by the retailer or by third parties, including the USPS, provided those deliveries are made by motor vehicles.
The law states that the fee only applies to taxable sales and is to be collected from the purchaser by the retailer. Retailers are required to separately state the fee on each invoice. The Department’s FAQs section explains that, for items sold through online marketplaces, the marketplace facilitator is responsible for collecting and remitting both sales tax and fee. Only retailers who have nexus with Colorado and are required to collect sales tax are obligated to collect the fee. Items returned by customers are not eligible for refunds of the fee.
The retail fee is due on each retail sale that is delivered, not each delivery. The law states each retail sale is subject to the fee regardless of the number of shipments required to deliver the items purchased. The Department’s FAQs section states that if a customer purchases multiple items in separate transactions that happen to be delivered at the same time in one delivery, the fee is due on each separate transaction.
Colorado is a “home rule state” which means that certain cities are authorized to self-administer their sales tax collection and enforcement. Unfortunately, it also means that rules are not uniform across the state. While the Department stated that the fee is not subject to state and state-administered local sales tax, the fee may be subject to sales tax in home rule cities. It is the retailers’ obligation to check with each city to determine whether the fee should be included in the tax base.