Even as some companies are still working through understanding the varying economic nexus issues with sales tax compliance, Colorado has imposed a new fee. The retail delivery fee, which is closely tied to the state’s sales tax compliance requirements, went into effect July 1, 2022, and imposes a fee of $0.27 on all deliveries by motor vehicle made to a location in Colorado.
Deliveries by mail, shipment or other means of motor vehicle transportation that include at least one item of tangible personal property subject to Colorado’s sales or use tax are subject to the state’s new retail delivery fee.
“This certainly has been challenging to our tax teams.”
Is it a Fee or a Tax?
Although not considered a tax, the retail delivery fee is closely tied to Colorado’s sales tax and its compliance requirements. Any retailer with an active sales tax account, a retailer license, or any sales tax liability reported after July 1, 2022, will be automatically registered for a retail delivery fee account and required to remit the fee.
The frequency for filing a retail delivery fee return follows the retailer’s sales and use tax return filing calendar. New retailers can request a retail delivery fee account with their sales and use tax account application.
Who Must Register?
Both in-state and out-of-state retailers are required to register for a retail delivery fee account if they have a sales tax account and sales tax liability. The Colorado Department of Revenue has confirmed that an out-of-state retailer who does not meet the economic nexus $100,000 gross annual threshold requirement for sales tax in Colorado is not required to collect the retail delivery fee until the threshold is crossed.
Who is Affected?
Although other size businesses are affected, unfortunately it is the small businesses that are once again the most impacted by the new fee. In an interview with KKTV, small business owner Sheri Cervantes of “A Flower Girl’s Dream,” estimates spending over $100,000 in software to comply with the fee. She told KKTV, “[t]hat 27 cents can absolutely add up, and I can’t really imagine what that could possibly be.”
The Colorado Department of Revenue’s website explains that the $0.27 delivery fee is actually comprised of six different fees: (1) Community Access Retail Delivery Fee, (2) Clean Fleet Retail Delivery Fee, (3) Clean Transit Retail Delivery Fee, (4) General Retail Delivery Fee, (5) Bridge and Tunnel Retail Delivery Fee, and (6) Air Pollution Mitigation Retail Delivery Fee.
However, regardless of how many fees are bundled into the one, overall delivery fee, the financial and time costs of maintaining the related compliance is burdensome, and disproportionately so on small businesses.