Colorado sales tax guide

Colorado sales and use tax in short

The sales tax is a consumption tax levied on the final customer and charged at the moment of purchase. It is prevalent globally and called the Value Added Tax in Europe. The seller of a good or service acts as the de facto collector of the tax, except for some electronic marketplaces. Once collected, the tax has to be reported to a responsible taxation authority and paid before the taxation period deadline.

Similar to the process in other states and countries, Colorado sales tax rates must be included in the final prices of goods and, in some cases, services. To become an official collector of the Colorado sales tax (CO), a company must register for a sales tax permit at the Colorado Department of Revenue Taxation Division. This institution is also responsible for administering and monitoring the taxpayers in the state and provides the most recent information on how much is the sales tax in Colorado.

Please keep in mind that not only companies physically located in Colorado must collect the sales tax from Colorado-based buyers. In many instances, remote sellers also have to include the applicable  Colorado sales tax rate in their final prices when selling to residents of Colorado. It depends on whether the remote seller has or hasn‘t yet formed a nexus in the state. Find more about the Colorado state sales tax nexus below.

The sales tax rate in Colorado consists of the base rate and local rates. If you want to jump right into calculating which sales tax rate you should use, please check out the sales tax calculator that you can find on 1stopVAT’s website.

Both sales and use tax Colorado have to be filed before the assigned deadline. Sellers are responsible for providing the details of sales tax collected, and buyers typically report the use tax when they buy taxable goods or services from tax-exempt entities.

Colorado sales tax registration

To become a sales taxpayer in Colorado, a company must match several criteria:

• It has to have a nexus in the state;
• It must receive revenue from selling taxable items in the state;
• The buyers are required to pay the sales tax in the state.

Colorado tax sales nexus

It is mandatory to register as a sales taxpayer in Colorado once a company forms a strong tie with the state. Here are the types of the sales tax nexus in Colorado:

• Physical nexus is when a company has employees, facilities, or other physical presence proof in Colorado.

For remote sellers:

• If a retailer’s sales exceed USD 100 000 in the current year, it has to register for a sales tax license by the first day of the month commencing 90 days after the threshold was exceeded. However, if the past year’s sales exceeded USD 100 000, the seller has to collect sales tax for the entire year. Even if the remote seller has missed the threshold’s milestone and failed to include the correct Colorado state sales tax rate in their prices, the seller is still responsible for filing the tax at the CoDOR.

• Affiliate nexus. People or companies soliciting sales for the remote seller or developing their goods in Colorado establish a nexus with the state for a remote seller once their gross receipts exceed USD 50 000.
• Trade shows. A single-time tax return can be made via the event promoter if a company sells taxable items during a trade show. However, participating in more than two events per calendar year and making sales at the events create a sales tax nexus.

Inventory in the state. Members of fulfillment by Amazon and other companies storing goods in Colorado might be subject to collecting the sales tax Colorado.

Items that must include Colorado sales tax percentage

Before figuring out what’s the sales tax in Colorado you must collect from your customers, it is best to find out the taxation status of your goods or services.

Colorado regulators note that food, medical equipment, farming equipment, seeds and plants, school-related items, renewable energy items, and aircraft parts are tax-exempt. Keep in mind that municipalities can establish additional exemptions. Services in general (with exceptions) and those related to these areas are also sales tax-exempt.  

Among sales tax-exempt organizations are charitable institutions and government agencies.

Registering for Colorado sales tax online

It is easy to acquire the Colorado sales tax license (also called vendor’s license) online. The fee for getting the license varies depending on the time of the year and can go from USD 4 to USD 16. For a new account to be opened, you will be required to pay an additional USD 50 deposit. The registration can be done online via the CoDOR Department of Taxation website, where you will have to upload the business and personal details. If you have trouble registering or finding the applicable sales tax rate Colorado, please contact us.

What is the current sales tax in Colorado?

Figuring out how much sales tax in Colorado a company must collect might be confusing because the total sales tax rates Colorado varies a lot based on the different local and municipality rates.

The base rate in Colorado is 2.9 %, and the local rates vary from 0 to 8.3 %. Therefore, the total Colorado sales tax rate can reach 11.2 %. For a quick way to check the applicable sales tax rate, check our Sales Tax Calculator or contact the 1stopVAT team.

Tax filing deadlines

It is important to stick to the filing deadlines imposed by the CoDOR. Depending on the size of the business, sales tax must be filed annually, quarterly, or monthly.  

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