The Colorado Department of Revenue (CO DOR) published guidance on a new $0.27 Retail Delivery Fee ("Fee") that retailers and marketplace facilitators (collectively, "Retailers") must collect on deliveries of taxable tangible personal property made by motor vehicles to a Colorado location. The Fee applies to orders placed on or after July 1, 2022.¹

While Colorado purchasers pay the Fee, Retailers must collect and remit the Fee to the CO DOR if they are responsible for collecting sales and use tax on the tangible personal property sold and delivered to Colorado purchasers by a motor vehicle. Retailers must also collect Fees on deliveries from out of state or by a third party.

The Fee does not apply to wholesale sales unless the delivery includes both items for wholesale sales and goods subject to sales or use tax.

"Deliveries" means mailing, shipping or otherwise delivering goods by motor vehicle. In FAQs posted to its Retail Delivery Fee webpage, the CO DOR said that deliveries include all modes of transportation used to make the delivery from the time the order is accepted until the item is delivered, which may include transporting the item to a store for in-store pick-up or from one business to another. Each order for delivery is considered a single retail delivery, regardless of the number of shipments required to deliver all the goods purchased.

The CO DOR's guidance lists the different components that make up the $0.27 Fee, but the receipt or invoice only has to list the total fee. The Fee is not subject to Colorado sales tax.

Retailers must use new Form DR 1786, Retail Delivery Fee Return, to report and pay the Fee. Forms DR 1786 are due on the same filing frequency and due date as the Colorado state sales tax return. If no Fee is due, Form DR 1786 must be filed quarterly. Retailers with multiple locations may file only one form for all the locations on their account.

Retailers responsible for the Fee must set up a separate account for the Fee. In-state and out-of-state 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 Colorado Retail Delivery Fee account. Retailers with existing sales tax accounts that are not automatically registered for the Fee can create an account through the CO DOR's Revenue Online website, by filing Form DR 1786 or through the CO DOR's Sales and Use Tax System (SUTS) (according to the CO DOR, the SUTS system registration option will be available by the end of 2022). New accounts can be set up by submitting Form CR 0100AP, Colorado Sales Tax and Withholding Account Application.

CO DOR stated that additional guidance will be issued following a rulemaking workshop on June 23, 2022.

Implications

Retailers making deliveries of tangible personal property to customers located in Colorado should review the new law and evaluate the need to adjust their order and billing systems to properly calculate and present the Fee on customer invoices. They should also consider (1) establishing processes to gather compliance data and to collect and remit the Fee, and (2) determining if a Retail Delivery Fee account needs to be created (or closed).

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ENDNOTE

¹ The retail delivery fee was established by 2022 CO SB 21-260 as part of a transportation system sustainability bill.