The state of Colorado and counties and cities within Colorado charge sales tax on the purchase of goods. Services are generally exempt from sales tax. The state provides a list of publications clarifying which businesses pay sales tax and which do not. Some companies such as auto repair companies provide both a service and sell items in the same transaction. If a car had a muffler replaced, the cost of the muffler would require sales tax but the labor to install it would not.
Wholesale companies typically are not required to collect sales tax; retailers collect sales tax at the time the product sells. Some companies must pay sales tax on items used for running the business. For example, a photographer must pay sales tax on the camera and equipment purchased to provide the service. The client isn’t buying the camera, just the service of the photographer to take the photos, which is not subject to sales tax. Sales tax is paid when the client purchases photographs if this cost is above and beyond the cost of the photographer’s service.
Nonprofit organizations and religious organizations are sales tax exempt. The state provides an exemption number from the state, typically starting with the number 98. These organizations must provide this number to the retailer when purchasing items and requesting the exemption.
Any good sold costing 18 cents or more is subject to sales tax per Colorado statutes. The frequency the business must file is determined by how much sales tax is collected. If the amount collected is $15 or less each month sales tax is paid annually. If the amount of tax is less than $300 per month the taxes are filed quarterly. If the amount is $300 or more per month then they must be filed monthly. Any business that collects more than $75,000 annually must pay with electronic funds transfer. Due dates are on the 20th of the month they are due. Late payments and filing may be assessed a failure-to-file/failure-to-pay penalty.
Sales Tax Rates
The Colorado state sales tax rate is 2.9 percent. Each county and city has their own rates that vary. It is the responsibility of the business to collect the correct rate. If your business will do business in many areas of the state, like at trade shows in different locations, you will need to know the sales tax rate in the location you are selling. Do not use the rate of your home location, as it may not be the same.
- State of Colorado: Tax Rates and Information
- State of Colorado Department of Revenue: How to File
- National Conference of State Legislatures. "Remote Sales Tax Collection." Accessed March 22, 2020.
- Mass.gov. "830 CMR 64H.6.7: Out-of-State Sales and Deliveries." Accessed March 22, 2020.
- California Department of Tax and Fee Administration. "Sales & Use Tax in California." Accessed March 22, 2020.
- California Department of Tax and Fee Administration. "Regulation 1620. Interstate and Foreign Commerce." Accessed March 22, 2020.
- Washington State Department of Revenue. "Destination-Based Sales Tax." Accessed March 22, 2020.
- Michigan Department of Treasury. "FAQs for Sales and Use Tax." Accessed March 22, 2020.
- IRS. "Publication 334 (2019), Tax Guide for Small Business (For Individuals Who Use Schedule C): For Use in Preparing 2019 Returns," Page 25. Accessed March 22, 2020.
- Illinois Revenue. "Collections Process." Accessed March 22, 2020.
David Rouse, currently residing in Raleigh, N.C., has been writing and teaching home owners about the mortgage industry since 1997. Rouse has written training manuals for mortgage professionals and conducted informational first-time home-buyer seminars, providing make-sense answers for a long and confusing process. He studied at Western Kentucky University.