Colorado Retail Delivery Fee | Everything You Need to Know

Here at LedgerGurus, we help so many ecommerce businesses to stay compliant with sales tax so they can focus on expanding their business. A lot of our clients are filing in Colorado, and it's not our favorite state to help them comply in. Colorado, like many other states, requires businesses to file on the state, city, county, and special district level. What makes it even harder is all the home rule cities have their own taxability, their own administrative rules, and their own borders as well.

But Colorado has complicated things even more for retailers selling into Colorado, by requiring retailers to start collecting Colorado's retail delivery fee starting July 1st, 2022.

1:42 What triggers the fee

So let's talk about what this fee is. How should businesses react to it? And what are some tips that I can give you guys?

First of all, a retail delivery fee is charged based on two criteria. First, you are selling tangible personal property into Colorado that's taxable in Colorado. So if your product is not taxable, if you are not selling product, if you're just providing services, don't worry about it. If you are selling to exempt entities, then your transactions are not taxable either. If you are selling to distributors, which will eventually sell to end users, don't worry about the delivery fee requirement as well. So if you are selling something tangible, delivered to customers in Colorado, that's the first requirement.

2:32

And the second requirement is if the delivery is done via motor vehicle. So not like an air shipment, but it has to be a road transportation that's delivering your products to a Colorado customer. And this road transportation can include third party carriers, can include your own company vehicles, and it also includes any common carriers like the UPS or FedEx or USPS.

So just to recap, two criteria. If you are selling tangible personal properties into Colorado that are taxable in Colorado, meaning if your product is taxable, if you pass the economic nexus threshold, then you are fulfilling the first requirement. The second requirement is if the delivery is fulfilled by motor vehicle.

3:33 The rate and who legally owes it

If you're required to remit this Colorado retail delivery fee, then the rate is $0.27, so 27 cents per delivery. There can be one item in a delivery. There can be multiple items in the delivery. It doesn't matter. It's a per transaction fee that Colorado wants sellers to collect.

And legally Colorado came out and said the purchasers are responsible for paying this delivery fee, this 27 cents per delivery fee, to the Department of Revenue. But businesses are required to act on the state's behalf to collect it from the customers and remit it to the states. So very similar to sales tax, even though it's a separate fee. Another thing to remember is this is going to be a separate form.

4:28 Three steps to get compliant

So now let's talk about how you can get compliant with this.

So the first step is to make sure an account is established on your existing Colorado Department of Revenue online login. Colorado has come out and said they will automatically create an account for you to file delivery fee, as a courtesy. Which I found this so ironic, because they're just adding more burdens to online seller's compliance.

So they are going to create this online account for you. So next time you log into your account, you should see one showing your account that needs to be renewed on a yearly basis. And the second one is your sales and use tax account. And the third one is going to be this retail delivery fee.

5:25

So after you check that this one has been opened up by the Department of Revenue, the second thing is to go to your sales channels and make sure to turn on the settings to start charging this 27 cents per delivery fee to your sales into Colorado. If you already have nexus in Colorado, it should be pretty easy. And remember, this 27 cents per delivery fee needs to be separately stated on the invoice, as required by Colorado's Department of Revenue. So that's the second step, is to turn on the settings.

And the third step is to file the return on time. This separate fee requires a separate return, but it's a pretty straightforward return. I'm happy to walk through the return with you, show you really quick what this return entails.

6:12

But just a few quick points is this return is due same time, same frequency as your sales and use tax return. So if you are a monthly filer, you'll be a monthly filer for the Colorado delivery fee as well. And it'll be due on the 20th of the following month to report prior month activity. So if you are monthly filer, then your first return for July will be due at the end of August. And if you're a quarterly filer, your first return will be due at the end of, let's think, October for Q3, because it starts in July. Okay.

And you can file this return either by logging into your online portal on Colorado's website, or you can file it by paper as well.

7:01 What Colorado's Q&A clarifies

Let's talk about a few things that Colorado mentioned in its Q&A, which I'll link below, for online sellers.

So first, this fee is applicable to in-state sellers as well as remote sellers. As long as you're selling products into Colorado, as long as you have nexus, you already have a sales and use tax account, then you will very likely need to collect this 27 cents delivery fee as well.

Second, if you sell through a marketplace like Amazon or Etsy or Walmart, then these marketplace facilitators are required to collect and remit this delivery fee on your behalf. So if you are a marketplace seller, you don't need to worry about collecting this. But if you are a hybrid, which means you sell on your own website as well as on Amazon or marketplace, then on your own website you still need to take care of that for your collection's purpose, because like Shopify or WooCommerce or BigCommerce is not going to automatically collect that for you.

8:06

Another thing to keep in mind is if in one delivery there's multiple items, and if one item is taxable but the others are not, as long as they're in one delivery, even just having one item that's taxable will make the whole thing taxable, so you need to collect delivery fee on that specific transaction.

And the fourth thing I would just want to point out is this delivery fee has nothing to do with whether shipping is free or not. It's a separate fee. So even if your website offers free shipping over a hundred dollars and someone places an order for $200 and they live in Colorado, and you sell tangible personal property and it's delivered by motor vehicle into Colorado, you still need to charge the delivery fee on that transaction, even though the shipping is free.

9:03 Walking through the form

Okay, now let's look at the form really quick so I can show you what is required for sellers to fill out. Let me share my screen.

This is form for retail delivery fee return, is form 1786. And the first page is all the instructions for different lines. And it just reiterates who must file, when to file, and how to file, which we already talked about in this video.

And the second page is the actual form. It's just one page long. It's a very simple form. So the top half is the business' information, your account number, your FEIN, Social Security number if you are sole proprietor, and where your business is located, which period you're filing for. The due date is the next, yeah, it's usually the next month, the 20th day, and your contact information here as well.

9:59

So the number of retail deliveries. This is the number of transaction you would put. And then retail delivery fee is $0.27. And if you go up here, it tells you from July 2022 to June 2023, the retail delivery fee rate per delivery is 27 cents. And this amount will likely change after June 2023, but we're not sure yet.

So I would put 0.27 right here, and fee due on retail deliveries is just the amount of transactions times by 27 cents. And if you have any excess fee that somehow you collected, Colorado wants you to remit that too. So you add them up, and then you get to line five, which is the total due.

10:48

With credit, if you read instructions here for line six, you can claim credit if you overpaid in prior period and did not file an amended return. Then you can have an amount here for credit, which will reduce the amount that you need to pay.

There is a penalty and interest. It's a minimum of $15, and interest is based on the interest rate. Colorado did come out and say, because they realized that it's a new requirement and some businesses might not have enough time to get everything set up, they are going to be working with companies to waive penalties and interest if this form was filed late. But they do want companies to remit the liability, which means the tax due from the retail delivery fee. Still, they'll waive penalties and interest, but they're not going to waive the actual fee part, based on the number of transactions delivered and the 27 cents.

So then you put it on here and you put your signature on here. And if you are filing online, you can make a payment online. Or if you're filing by paper, you can accompany this with a check.

12:07 What to do next

Okay, so that's all the information I want to share with you guys about Colorado's retail delivery fee. And just the most important thing is you need to start collecting them, so you don't have to pay this fee out of your pocket, and remember to file it in August if you're a monthly filer, and file it in October if you're a quarterly filer in Colorado.

If you have any questions, please leave a comment below and I'll for sure get back to you. If you haven't, please subscribe to our channel, like this video, share it with a friend that's also in ecommerce that might be impacted by this new change, and check out our services. I'd love to work with you either on a consulting basis or on an ongoing basis. And I hope you guys have a great day.