If you will be selling a product to the end user, you must collect sales tax. The amount of sales tax you collect depends upon the taxing districts where your business is located, the type of business you are in, and how the transaction is completed. To determine the amount of tax you must collect, you need to add together the various rates that apply to your business (DR 1002). To determine how to collect the state tax, refer to FYI Sales 62 Guidelines for determining when to collect state and collected local sales tax.
The 2.9% state sales tax must be collected by all businesses selling tangible, personal property located in Colorado. Special Districts Businesses located in the Denver Metro area are required to collect 1.0% for the Regional Transportation District (RTD) and 0.1% for the Scientific and Cultural Facilities District (SCFD), for a total of 1.1%. The RTD/SCFD area includes all of Denver, Boulder, Broom-field and Jefferson Counties, the western portions of Adams and Arapahoe counties, and the northeast portion of Douglas County, including Highlands Ranch and parts of Broomfield. Businesses located in Rural Transportation Authority Districts are subject to sales/use tax. DR 1002 will provide boundaries and current rates. County Of Colorado’s 64 counties, 51 have established county sales taxes. All county taxes are collected by the state.
There are 224 cities that have established city sales taxes. Most small cities’ sales taxes are collected by the state. However, most of the larger cities (home rule cities) self-collect the city portion of the sales tax directly from the vendor and require a separate reporting form.
There are 28 counties and various cities that have established lodging taxes on hotels, motels, bed and breakfast, condominiums and camping spaces (DR 1002).
Other special taxes are the Local Improvement District tax, Mass Transit District tax, Multi-Jurisdictional Housing Authority (MHA), Public Safety Improvement (PSI), Health Services District Tax (HSD), Metropolitan District Tax (MDT) and Local Marketing District Tax (DR 1002).
To determine the amount of tax you must collect at your location, add all the rates that apply to your location and type of business. For example, if you have a restaurant in the City of Lakewood, you must collect 2.9% for the state, 1.1% for RTD/SCFD, 0.5% for Jefferson County, and 3.0% for Lakewood. Your total sales tax rate would be 7.5%. Refer to FYI #Sales 62
Publication DR 1002, “Sales/Use Tax Rates” lists all the various sales tax rates throughout Colorado and should be used as a guide to calculate the sales tax rates for different locations. The Department of Revenue also publishes separate rate charts which are useful tools in determining the correct amount of tax based upon the tax rates and the dollar value of the sale. You can easily find the current sales tax and special tax rates in your county and/or city at www.taxcolorado.com.
If your business involves sales at your client’s address, deliveries or is mobile, you must collect the appropriate tax for each sales location. This will apply to many different types of businesses, including but not limited to: traveling salespersons, mobile locksmiths and interior decorators. If this situation applies to you, you will not have a principal place of business and must collect the appropriate tax for each point of sale. You should obtain one retail sales tax license to collect all state taxes, You may need several city sales tax licenses from the self-collected Home Rule cities where you do business. You do not need to obtain an additional state tax license for each sale tax location. You may need several city sales tax licenses from the self-collected home rule cities where you do business. Department of Revenue Publication DR 1002, Colorado Sales/Use Tax Rates, lists all state, county and city sales tax rates, as well as addresses and phone numbers for self-collected home rule cites with separate licensing and collection procedures.
If you will be selling at events, you must have a state multiple events license. If the event is held in a city that collects its own city sales tax, Home Rule city you may be required to obtain an additional city sales tax license.
Flea markets that operate more than three times per year are considered to be a retail location. If you sell at a flea market more than five times a year, you must obtain a retail sales tax license. You may not use an event license.
If your business has multiple permanent locations sites, each site must have its own license and collect the appropriate tax. Exception: vending machine operators and mobile businesses are only required to have one state license but report the appropriate tax collection under additional sites. However, each machine is required to display a vending machine decal and may still be subject to local licensing requirements. All local taxes and licensing at the vending machine location(s) are applicable.
If you operate a small business from your home and your total annual sales are less than $1,000 per year, you do not have to obtain a state sales tax license. However, you must collect all applicable sales taxes and file a “Combined Annual Retail Sales Tax Return,” DR 0100A, at the end of each calendar year. In addition, you will not be able to purchase inventory or supplies at wholesale without a license. If you are located in a home rule city, contact your city officials regarding your local sales tax requirements.
Colorado allows charitable organizations that have been classified 501(c)3 by the U.S. Internal Revenue Service an exemption from state-collected sales tax. The exemption must be requested in writing using the form, “Application for Sales Tax Exemption for Colorado Organizations,” Form DR 0715. The exemption only applies to items purchased for use in the regular operations of the organization. When making tax exempt purchases, the organization must show a copy of the exemption certificate or have one on file with the vendor. Purchases of $100 or more must be made using an organization check or credit card.
Tax exempt organizations must still obtain a sales tax license and collect sales tax on all items sold to the public. However, organizations making sales for no more than 12 days per year with gross sales of less than $25,000 are exempt from state sales tax licensing and the obligation to collect sales tax. Most cities and counties have not adopted this exemption. Licensed charitable organizations are exempt from payment of the $50 deposit on retail sales tax licenses. FYI Sales 2, “Sales Tax Exempt Status for Charitable Organizations: Application Requirement.”