Confusion is expected as the new Colorado retail delivery fee kicks in, requiring all sellers to adjust their invoicing process.
Effective July 1, 2022, Colorado will impose a 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. According to the State Department of Revenue site:
The retailer or marketplace facilitator that collects the sales or use tax on the tangible personal property sold and delivered, including delivery by a third party, is liable to collect and remit the retail delivery fee. Deliveries include when any taxable goods are mailed, shipped, or otherwise delivered by motor vehicle to a purchaser in Colorado.
The retail delivery fee is due at the same time as your sales tax return. Returns are generally filed on a monthly basis and must be filed on or before the 20th day of the month following each reporting period. Retailers permitted to file state sales tax returns quarterly, annually, or another 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 state-wide, does not need to be separated by jurisdiction, and is calculated per sale. The retail delivery fee is made up of six different fees. Review the full statement and the rates via the link below.
Some of the Colorado home rules – of which there are 70 – are as of this writing taking the position that the Colorado delivery fee is part of the purchase price and is considered taxable. Thus, there are some implications that the State did not give thought to when they enacted the delivery fee, which may need further consideration.
Denver, the largest home rule, is considering taxing the fee as is Fort Collins. So, even if the fee is stated separately, cities are wondering why it should not be included in the purchase price, and subject to tax, given that it is mandatory.
Some officials acknowledge, however, that before including the fee in the purchase price, a thorough analysis would be necessary to consider whether a customer has the ability to obtain the taxable item without paying that particular charge–in this case the delivery fee–on the invoice. It doesn’t appear that this fee is associated with a specific service by the vendor but rather is a mandatory charge imposed by the State.
Denver does not currently have an exemption in its municipal code for this fee. As it appears, the fee would likely be taxable in Denver. Other home rule cities have similar municipal codes, and they would likely follow Denver’s direction on taxing these mandatory delivery fees imposed by the State of Colorado.
As of this writing, sales tax automation providers are not adding these returns to their return filing calendars. Those biz-taxpayers with over the road tangible personal property deliveries must figure out how they are going to charge this fee for each applicable sale to Colorado customers, get registered and file. (Note that registration is automatic for those taxpayers who already have a sales tax account with the State.) The simplest way is to add a line item to all items delivered to Colorado for the fee on invoices ($0.27). This fee will require a separate return as well.
TaxOps will be making comments during an upcoming stakeholder meeting with the Colorado Department of Revenue. If you have comments and wish to help us by going on the record sharing how this fee will affect your company, please let us know at firstname.lastname@example.org.
Source: Colorado Retail Delivery Fee