By the TaxOps State and Local Tax Team

In advance of a June 23 workgroup session discussing the new Colorado Delivery Fee, TaxOps submitted the following letter to the Colorado Department of Revenue. As tax specialists working with thousands of dynamic businesses across the nation and internationally, we recognize that this fee adds a layer of compliance complexity for both in-state and remote sellers and generates a host of application questions and concerns. This fee is effective as of July 1 and there are few exceptions.  

Letter to the Colorado Department of Revenue

June 22, 2022

Colorado Department of Revenue

2882 Pierce Street

Lakewood, CO 80214

Re: Stakeholder Workgroup: Colorado Delivery Fee

We are writing to address concerns and questions on the Colorado Delivery Fee in advance of the Colorado Department of Revenue (CDOR) workgroup session scheduled for June 23, 2022, at 10 am in Lakewood. We understand that this workgroup is being convened to discuss information in advance of the effective date of the new Colorado Retail Delivery Fee on July 1, 2022. This fee requires retailers to collect a $0.27 fee every time they deliver taxable goods and services to a Colorado address.

As tax specialty providers who work with thousands of dynamic businesses across the nation and internationally, we recognize that this fee adds a layer of compliance complexity for both in-state and remote sellers and generates a host of application questions and concerns, as noted below.


Home Rule Treatment

Should the fee be effective July 1, 2022, there are initial considerations for the workgroup to consider. Some of the Colorado home rules – of which there are 70 – are as of this writing taking the position that the fee is part of the purchase price and is considered taxable. Thus, there are some implications that the State did not give thought to the layering effect of this fee when they enacted it, which may need further consideration.

Regarding Rule 43-4-218 (3)(a) per sale basis:

• Is there one delivery fee for the state, including local jurisdictions that the state collects, or is it a fee imposed by each individual jurisdiction (i.e., a fee applicable at the statutory city and county level)?

• Similarly, is the delivery fee considered to be a part of the sale, and therefore taxable at the state level? For example, is it like a Public Improvement Fee, or PIF? Is the delivery fee included in the definition of a sale and therefore, taxable at the local level? Home rule cities have indicated that they will likely be taxing this fee as a part of the sale; we would like to confirm the proper treatment for sales tax purposes.

Denver, for example, is the largest home rule and 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 the fee 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 of the delivery fee – on the invoice. It does not 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.

Grace Period for Enforcement

Those business 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 of Colorado.) Sellers must 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.

• As of the writing of these comments, website cart software providers have not yet figured out how to implement and write into the platform how to collect this fee. It is possible that there is skepticism as to legal impact of writing code that determines if a taxable product in Colorado is added to a website cart and is then delivered via motor vehicle. Was there any consideration from the State as to how the software vendors would address, essentially, offering tax advice when supporting an online shopping cart?

• Due to the rushed nature of administering this fee, and to allow time for sales tax automation and website cart software providers to incorporate this fee into their software solutions, we request the CDOR consider extending a grace period for enforcement through July 1, 2023.


With regard to Rule 43-4-218. Retail Delivery Fees, the purpose of the rule is to set forth the manner in which retail delivery fees are collected, administered, and enforced. We have the following questions and concerns by section.

Rule 43-4-218 (1) Definitions

• Please provide further clarification on the private company application of “enterprise retail delivery fee” and the implications regarding public access fees.

Rule 43-4-218 (4)(b)(ii) Drop Shipments

• In a drop shipment, we understand that the retailer, who does not have the item in its warehouse and may never directly handle the item, is nevertheless required to charge the retail delivery fee under this rule. Should the retailer send an invoice for $0.27 to the drop shipper or to the ultimate purchaser? Alternatively, would a drop shipper have any
requirement to collect the fee?

Rule 43-4-218 (4)(e) Exemption Certificates

• With respect to exempt customers, are sales tax exemption certificates sufficient proof that a retailer is exempt from collecting the retail delivery fee? If not, what documentation should be requested and for how long should the retailer retain such documentation after the sale?

Rule 43-4-218 (5) Deliveries of Marijuana

• While marijuana is exempt from the retail delivery fee, how are other related products treated, such as CBD and edibles?

Rule 43-4-218 (7) Collection of the Retail Delivery Fees

• Can sellers absorb the cost of the fee, or must the fee be passed through to the buyer? (i.e., can the seller pay the retail delivery fee, likely as a matter of administrative ease)

Rule 43-4-218 (9) Refunds and Credits

• How does the vendor file a claim for refund?


• Do vendors who do not meet the nexus threshold for sales in Colorado have to collect the fee if they are not responsible for collecting sales tax? Or is this fee only applicable once a seller has nexus in Colorado?

• What about customer product or service returns or exchanges – would the return trigger a new fee on the return transport of the item?

• How will this fee be administered and enforced or audited?

• What type of remediation is anticipated, if any, to non-compliant vendors?


We understand opposition has been raised to the fee, with concerns centered on how the fee evades the Taxpayer Bill of Rights (TABOR) and is therefore deemed unconstitutional. TABOR requires a vote any time that taxes are increased; naming a chargeable item a “fee” should not circumvent voter requirements. In 2020, voters approved Colorado Proposition 117, the Require Voter Approval of Certain New Enterprises Exempt from TABOR Initiative, which requires statewide voter approval when an enterprise’s projected or actual revenue from fees and surcharges is greater than $100 million within its first five years. This retail delivery fee (along with the other revenue raising components of the bill) is projected to raise $5.4 billion by the 2031-32 fiscal year and therefore exceeds that $100 million threshold.

This fee is collected, remitted, and administered at the same time as a sales tax, falls under the same penalty and interest implications of sales tax, and requires the same exemption documentation as sales tax. How is this not a tax?

We appreciate the opportunity to comment on a rule that creates a substantial burden on businesses selling into the state of Colorado.


Judy Vorndran, Partner

Stacey Roberts, Director

Connie Zoerink, Director

Meredith Smith, Senior Tax Manager

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