CO Biz Owners Need to Collect a New Tax
While this information affects all Colorado consumers, business owners need to know that they have more taxes to collect starting in July.
The Colorado Department of Revenue is instituting a new retail delivery fee (RDF) beginning July 1, 2022. Per the new rules, all Colorado retailers selling items that are delivered to customers via motorized transportation are required to charge their customers a 27-cent delivery fee that is then remitted to the Colorado Department of Revenue.
In other words, any type of sale where tangible items are transported to the customer, whether that transportation is done by you or a third party, instead of the customer picking the item up at your location, is subject to the new tax. This new delivery fee is in essence an additional sales tax. The fee must be clearly notated on your invoice using the label “Retail Delivery Fee.”
Even though this is essentially a new sales tax, there are differences between how this fee is calculated and how regular sales tax is calculated. For instance, the RDF is a per sale flat amount, not a percentage charged on the amount of items sold subject to sales tax. Meaning, if you have 10 items on an invoice where nine of the items are material subject to sales tax and one is labor, for total of $10,000, you only charge one 27-cent RDF. Similarly, if you have one item on an invoice for $10 subject to sales tax, the RDF is still only one 27-cent RDF. Labor/service only invoices are not subject to the RDF because the invoice has to include a tangible item subject to sales tax. An invoice for a service call would have no RDF applied. Otherwise, this new tax works similarly to regular sales tax. Out-of-state sales, sales to exempt organizations, and wholesale sales are exempt from the RDF.
Clients should feel free to reach out to us with any questions. We will try to answer them to the best of our ability with the limited information that the Department of Revenue has released so far.