On July 1, 2022, Colorado enacted a new “retail delivery fee” (RDF). This $0.27 fee (which will update to $0.28 on July 1, 2023) applies to all orders containing at least one taxable item shipping to customers by motor vehicle in Colorado.
Technically the RDF is a fee and not a sales tax, but it works similarly and Colorado taxpayers are required to remit any fees due at the same time as sales tax filing.
If you have nexus in Colorado, it’s important to understand how the retail delivery fee impacts your business. And even if you don’t have nexus in Colorado, keep reading, because Minnesota is the next state to enact a retail delivery fee, and New York is on deck.
I have nexus in Colorado. What do I do about retail delivery fees?
Collecting the Colorado retail delivery fee is not always as simple as tacking on an extra few cents to each transaction. Let’s dig in.
Who needs to collect the Colorado retail delivery fee?
Currently, retailers who make more than $500,000 in annual sales shipped to buyers in Colorado must collect the retail delivery free on each transaction.
Important to note: The fee is on the transaction and not the shipment. So you’d only charge your customer one RDF even if you have to ship the order in multiple shipments.
When am I required to collect the Colorado RDF?
If you are a qualifying business, you must collect the fee on all transactions including at least one taxable item delivered by motor vehicle to a Colorado customer.
If the transaction is completely non-taxable or if the customer picks up the items or otherwise receives them in a way that doesn’t involve a motor vehicle, then you are not required to collect the RDF on that transaction.
The Colorado RDF still applies even if you do not charge for shipping the order.
How do I collect the retail delivery fee?
To collect, add the $0.27 (rising to $0.28 on July 1, 2023) fee onto the customer’s receipt or invoice labeled “retail delivery fee.” Remember that only one fee is required per transaction, even if the items purchased ship in multiple shipments.
Alternatively, starting July 1, 2023 you can elect to pay the fee yourself and elect not to charge this fee to the customer.
If you sell on a marketplace like Amazon or Walmart, they are required to collect these fees on your behalf.
If you sell on an e-commerce platform like Shopify, you’ll need to confirm that they are collecting the retail delivery fee on your behalf.
How do I file and remit the Colorado retail delivery fee?
In general, you are required to remit the Colorado RDF at the same time that you file sales tax. However, it is remitted separately on either paper form DR 1786 or via your online Colorado Department of Revenue sales tax account as a separate account type.
If you don’t already have a Colorado Retail Delivery Fee account, but do have a Colorado sales tax account, follow these directions:
- Login at the Colorado Department of Revenue
- On the next screen, click the “More” tab
- In the “Additional Actions” panel, click on the “Add Retail Delivery Fee Account” link
If you don’t see this link, the state may have automatically registered you for this account.
Unlike sales tax collected, the Colorado RDF is statewide and does not need to be separated out by jurisdiction. You can simply remit a lump sum totaling all the separate retail delivery fees you collected.
What else do I need to know?
To make matters more complicated, some self-collecting home-rule cities consider retail delivery fees subject to sales tax. You can read more about the nuances of the Colorado retail delivery fee here.
Need help with Colorado retail delivery fees?
Contact HOST if you have any questions at all about Colorado retail delivery fees and we’ll ensure you are in compliance.
The Future of Retail Delivery Fees
Next year, Minnesota will follow in Colorado’s footsteps and enact their own $0.50 delivery fee on taxable orders of $100 or more. While it hasn’t passed yet, New York City is also eying a $0.25 delivery fee.
At HOST, we’ve been helping businesses with their sales tax for twenty-seven years. And one thing we’ve seen over and over again is if one state hits on a way to make more money off of taxes and fees, other states will soon follow. We’ve seen this most recently with economic nexus laws, marketplace facilitator laws and the now-outdated notice & report laws.
We’ll continue to update you about new fees that will potentially impact your business. In the meantime, if you’re worried about sales tax compliance, get in touch with HOST and we’ll make sure your business processes are up-to-date.