Colorado collects sales tax on most goods and services sold in the state. The sales tax varies from county to county, though the state sales tax is only 2.9 percent. When a business taxpayer adds local jurisdiction taxes, the sales tax could be as high as 11 percent. This guide does not fully describe all of Colorado’s tax laws and regulations regarding taxes. Businesses should contact a business attorney or visit the Colorado Department of Revenue to learn which rules and regulations are associated with their industries.
Types of taxes
Colorado requires businesses to pay state sales tax, discretionary sales tax (based on the business’s jurisdiction), transient rental taxes, and franchise taxes.
Colorado’s state sales tax rate is 2.9 percent on retail sales, leases, rentals, taxable services, and goods unless that service or item is exempt. Colorado changes its taxes quite often – sometimes as much as every six months, so always check for the new sales tax rates, especially for jurisdictions.
The due dates for sales taxes are as follows:
- If a business owes $15 or less per month, the business may file and pay annually. All reports and taxes are due on January 20 of the next year.
- If a business owes less than $300 per month, the business may file and pay quarterly. The quarterly due dates are:
- April 20 for taxes collected from January through March;
- July 20 for taxes collected from April through June;
- October 20 for taxes collected from July through September; and
- January 20 for taxes collected from October through December.
- If a business collects $300 or more per month, the taxes are due on the 20th day of the month following the month it collected the taxes. For example, taxes collected in April are due on or before May 20.
Finally, if a business collects more than $75,000 per year, it must pay by electronic funds transfer.
When you purchase items to resell, you do not pay taxes on tangible personal property – your customer pays the sales tax, which you then submit to the Colorado Department of Revenue. However, if you purchased an item to sell but used it in your business, you must pay use tax. The use tax is 2.9 percent.
If a business has less than $300 in use tax during the year, the business can file an annual tax return. Yearly reports and payments are due by January 20 of the next year. For example, if you had $300 or less in use tax during 2021, the return and payment are due on or before January 20, 2022.
If the business has more than $300 in use tax due in any one month, the business must file a return and pay the tax before the 20th day of the following month. For example, your business was slow during January 2022, so you ended up using the product you intended to resell so it wouldn’t go to waste. The taxes due on those products added up to $301. You must file a sales tax return and remit the use tax on or before February 20, 2022.
Discretionary sales surtax
Local jurisdictions can add a discretionary percentage to the state’s sales tax. These local sales taxes change more often than the state sales tax – sometimes as often as every six months. Colorado prints a “cheat sheet” that shows the most recent tax changes. The cheat sheet for January 2022 through June 2022 shows changes for several counties and cities.
For example, Eckley did not have a discretionary use tax prior to January 2022. As of January 2022, businesses must now pay a use tax of 2.10 percent in addition to the state’s use tax of 2.9 percent. Businesses in Eckley must pay a total of 4.19 percent use tax.
Another type of discretionary tax is the special district tax. A few locales have these taxes, including:
- Eagle MTA: No use tax, but has a sales tax of 0.50 percent. It does not charge a service fee. Certain items are exempt, including food for consumption.
- Lake County Lodging, with the exception of Leadville: No use tax and a state sales tax of 1.90 percent. There is no service fee. There are no exemptions.
- Pikes Peak RTA: Adds Calhan. The tax rate is 1 percent with a 3.33 percent service fee. Exemptions include food for consumption and several others.
- San Miguel County Lodging: Telluride is omitted in the new tax. The tax is 2 percent with no use or service fee. There are also no exemptions.
- Summit MHA: Deleted the service fee. The sales tax rate is 0.725 percent. The use tax rate is 0.125 percent and only applies to vehicles. There are several exemptions, including food for consumption.
- Summit MTS: Deleted the service fee. The tax rate is 0.75 percent. This jurisdiction does not charge a use tax, and there are no exemptions.
Even if the business jurisdiction you are in does not charge sales and use taxes today, you should check often. You can search for your local jurisdiction to find out if you must pay discretionary sales taxes.
Transient rental taxes
Colorado charges sales tax on rentals that are less than 30 days. Accommodations that are subject to Colorado sales tax include:
- Hotels and motels.
- Apartment hotels.
- Lodging houses.
- Motor hotels.
- Guesthouses and guest ranches.
- Dude ranches.
- Trailer coaches.
- Mobile homes.
- Campground spaces.
- Auto camps.
- Trailer courts and trailer parks.
Businesses that have a nexus in Colorado must pay sales tax. If a business does not have a physical business location or sublocation in Colorado, it might still have to pay Colorado sales taxes. A physical nexus also includes having independent contractors soliciting business, even though you do not have an office or warehouse in Colorado.
Businesses, including marketplace sellers, have an economic nexus if the business made more than $100,000 in sales during the previous calendar year. Additionally, the business must provide its customers with an annual summary of purchases if those purchases total over $500 per customer. This report helps the customer pay use tax where applicable. Businesses must also provide the same reports to the Colorado Department of Revenue.
Colorado does not levy a franchise tax. However, businesses must pay state income taxes and other business taxes.
Registering for Colorado's taxes
A business must register to pay sales and use taxes in Colorado. The retail sales tax license allows businesses to make retail and wholesale sales. If the business has one location, you can register at MyBizColorado or file CR 0100AP, the Sales Tax/Wage Withholding Account Application.
If your business has more than one location, you must use the Sales Tax / Wage Withholding Account Application linked above to report sales of goods.
If the business is attending a special event at a temporary location that is not the regular business location, you must apply for a two-year license that is free if you already have a sales tax license. Use Form DR 0589, Special Event Application.
If the business does not have a sales tax license and is only attending the special event, you can file at Revenue Online and pay for the license. If you already have the single-use license when you file, you do not have to pay again.
If the business plans on attending more than one special event, such as several craft fairs, the business should apply for the Multiple Special Event License by using the same Form: Form DR 0589.
Finally, if a business is a mobile vendor, it should have a sales tax license for the main office and add the various sites to the license. The state does not charge additional fees for the separate sites.
Colorado tax exemptions
Colorado offers sales and use tax exemptions for certain types of businesses with sales of tangible personal property. A business can apply for the Sales Tax Exemption for Colorado Organization by filing Form DR 0715. The Department of Revenue states that a business “should” obtain tax-exempt status from the Internal Revenue Service “if necessary,” first.
Businesses that qualify include:
- Charitable organizations.
- Government organizations.
- Religious organizations.
Additionally, contractors who purchase building materials for projects for tax-exempt organizations can apply for a license by using Form DR 0172, Contractor Application for Exemption Certificate. Subcontractors must obtain a copy of the license from their general contractors. This exemption license does not have a fee, and the state does not issue blanket certificates.
Calculating Colorado's sales and use tax rates
When calculating Colorado’s sale and use taxes, add any jurisdictional taxes to the state sales tax for each item. For example, Widget A sold in Denver has a sales tax rate of 8.81 percent. The state’s sales tax rate is 2.9 percent. The business must add the Denver city and county jurisdictional taxes of 4.81 percent, plus the Regional Transportation District tax of 1.00 percent, and the Scientific and Cultural Facilities District tax of 0.10 percent.
Filing and paying Colorado's sales and use taxes
Most businesses can file with Revenue Online. If a business must or wants to file by paper, it must use Form DR 0252, Consumer Use Tax Return. The RTA Consumer Use tax is filed separately with Form DR 0251. A business can find more information about the forms required by visiting the Sales & Use Tax Forms page.
The state sales tax for Colorado for 2022 is 2.9 percent. Various jurisdictions have separate sales and use tax rates that businesses must add to the state sales tax rate.
Most retail sales are taxed in Colorado at the state sales tax rate plus the jurisdictional tax rates.
Yes. You must pay sales taxes on a room that you rent in your home if you rent it for less than 30 days.
Yes. A business must pay taxes on items purchased from another state if the seller did not charge Colorado sales tax and the item is taxable.