Colorado’s New Retail Delivery Fee Affects Retailers Across the US

If your business sells taxable items that will be delivered by a motor vehicle (yours or a third party) to a location in Colorado, there is important news for you.

Beginning July 1, 2022, the Colorado Department of Revenue (CDOR) will require businesses that sell taxable items delivered by a motor vehicle to charge, collect, and remit a fee to the CDOR. This new fee applies to all retail sales delivered by a motor vehicle to a location in Colorado.  The purpose is to mitigate the costs of infrastructure maintenance and pollution due to increased motor vehicle delivery traffic in the state.

The fee – $0.27 per retail sale (for delivery) – must be charged to the purchaser, collected by the retailer, and remitted to the CDOR on a separate return (Form DRF 1786) in line with existing sales tax filing frequencies and due dates. The fee is subject to increases due to inflation beginning in 2023.

There is a lot of information to unpack on this. We’ve provided a summary below that is not all inclusive; we dig deeper into details in the article.

• If your business delivers anything in the state of Colorado that is subject to CO state sales tax and delivery is via anything but a horse and buggy, bicycle or pedestrian, you’ll need to charge and remit the RDF.
• You must charge, collect, and remit the RDF with the same frequency and dates as your CO sales tax filings.
• If you pay CO sales tax (or have sales tax liability), you’re automatically registered as an RDF account and cannot opt out.
• You must follow clear guidelines on delineating the RDF on receipts and invoices.
• This all starts effective July 1, 2022.
• We’re here to help.

Is your business affected?

Retailers licensed to make sales in Colorado and impacted by this fee include but are not limited to:

• Restaurants that deliver
• Grocery stores that deliver
• Flower delivery services
• Sales that require delivery (i.e., furniture, appliances, electronics, etc.)
• Online stores that ship orders (i.e., eBay)
• Business-to-business retail sales (excluding wholesale sales)

Which transactions are subject to the RDF?

Retail sales that have at least one item delivered by motor vehicle and include one item subject to Colorado state sales tax.*

* If all the property sold is exempt from Colorado state sales tax, the delivery will be exempt from the RDF. This includes sales that are entirely wholesale sales. Sales that include both exempt and taxable tangible personal property are subject to this fee when delivered by motor vehicle to a location in Colorado. A delivery that is made to a purchaser who is exempt from paying the state sales tax (such as a government or a charitable organization) is exempt from the RDF.

Does your business need to register and if so, how?

Retailers with an active sales tax account, a retailer license, and any sales tax liability reported after January 1, 2021, will be automatically registered for an RDF account by the CDOR by July 1, 2022.  There is no option to opt out of the automatic registration.

Any open out-of-state retailers or retailer’s use account holders will be automatically registered for an RDF account.

There is no fee to register, and no additional license is required.

Any retailer that opens an account after July 1, 2022, or doesn’t meet the above criteria can register through Revenue Online, by filing Form DR 1786 or by submitting form CR 0100AP.

If your business doesn’t make sales of taxable tangible personal property for delivery by a motor vehicle to a location in Colorado, you will not be required to file RDF returns. In this case, your automatically opened RDF account will be automatically closed by February 28, 2023.

Your next steps:

Include and label “Retail Delivery Fee” clearly on receipts or invoices and charge the purchaser(s).

File the RDF return timely and remit fees. Return must be filed even if there are no fees to report. It can be filed through multiple channels including Retail Delivery Fee Return (Form DR 1786) or Revenue Online. Additionally, the CDOR’s  Sales and Use Tax System (SUTS) is expected to be available for RDF filing by end of 2022.

Payment: Electronic payment methods, apart from EFT and ACH Debit payments are available (list here).

Our national sales and use tax professionals are staying on top of this new legislation and advising our retail clients on next steps. If your business is affected by the RDF and you’d like our help with this and other sales and use tax matters, please contact us by selecting the contact an advisor button below.