Limited special deduction for sales tax and delivery fee beginning in July 2022 in Colorado
Sales tax special deduction for a limited time in Colorado
Colorado House Bill 22-1406 allows qualifying retailers to claim a limited special deduction from state taxable sales under certain conditions and to retain and spend the resulting state sales tax. The deduction is available for sales made in July 2022, August 2022, and September 2022. This limited special deduction is for Restaurants, Bars, and Food Service Contractors, Mobile Food Service Retailers (food trucks), and caterers.
Businesses are still required to collect all applicable state and local taxes but only have to pay local sales taxes and state sales taxes in excess of the amount related to the special deduction. The temporary deduction from state taxable sales for qualifying retailers is equal to the lesser of state net taxable sales or $70,000 for each month in the specified sales tax period.
New delivery fee for all retailers in Colorado
Recent Colorado statutory changes require retailers to charge, collect, and remit a new fee. Beginning July 1, 2022, retailers must collect a $0.27 retail delivery fee on every retail sale delivered by motor vehicle to a location within Colorado.
This applies to all retailers, including restaurants. The retailer or marketplace facilitator that collects the sales or use tax on the tangible personal property sold and delivered, including delivery by a third party, is liable to collect and remit the retail delivery fee. Deliveries include when any taxable goods are mailed, shipped, or otherwise delivered by motor vehicle to a purchaser in Colorado.
The retail delivery fee will be reported and paid on a new return, the DR 1786 form. The retail delivery fee is collected state-wide, does not need to be separated by jurisdiction, and is calculated per sale. If every item in a retail sale is exempt from sales tax, the delivery is also exempt from the retail delivery fee. However, if one or more items in the transaction are subject to sales tax, the retail delivery fee is due. Each sale for delivery is considered a single “retail delivery” regardless of how many shipments are needed to deliver the items purchased. This rate can be adjusted for inflation per the law.
Karen is a Principal in the CLA Bizops practice specializing in serving restaurant clients as a CFO. She has 25 years of experience in the retail and restaurant industry with senior management positions at Wilsons Leather, Famous Dave's, and a division of Hallmark Cards. She is based out of Minneapolis, MN
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