The Colorado Department of Revenue has recently reminded retailers about the state’s new Retail Delivery Fee effective July 1, 2022, and originally passed last summer. The fee is imposed on every delivery by a motor vehicle to a location in Colorado with at least one item of tangible personal property subject to the state sales or use tax. While not a tax itself, the fee is imposed on deliveries that are subject to the state sales and use tax, and requires compliance obligations distinct from the sales tax.
The background
The Retail Delivery Fee is made up of six individual fees that currently total $0.27 per retail delivery to Colorado purchasers. The fee is ultimately imposed on the purchaser, but the retailer or marketplace facilitator collecting the sales or use tax from the Colorado customer is required to collect and remit the fee. Any collected fees are due with the sales tax return, and thus due monthly, quarterly or annually based on the retailer’s current filing schedule. The fees will be reported on a new form, Form DR 1786.
Additionally, customer invoices or receipts must indicate the new fee as “retail delivery fees.” Each delivery, regardless of the number of items included, is one individual delivery for purposes of the fee. If every item in the delivery is exempt from the sales and use tax, such as wholesale sales, then no Retail Delivery Fee will be due. However, the fee will be due if a single item in the delivery is subject to the tax.
Fee registration and reporting
Any retailers, in-state or remote, with an active Colorado sales tax account, a retailer license and sales tax liability reported after Jan. 1, 2021, will be automatically registered for the new fee account by July 1, 2022. After July 1, 2022, an account can be created through the department’s online website or by filing a completed Form DR 1786.
A single Form DR 1786 and corresponding payment must be filed at the same frequency as the sales and use tax return. Only one Form DR 1786 is required per period; the form must also be submitted if no deliveries subject to the fee were made in any one period.
Takeaways
The fee is due on retail deliveries by motor vehicle to Colorado purchasers without regard to whether the retailer’s own vehicles are making the delivery or whether the delivery is made through a third-party. Taxpayers, especially delivery restaurants, furniture stores, flower delivery, e-commerce vendors and grocery deliverers, making retail sales of tangible personal property to Colorado customers should confirm that their accounting systems are configured to account for the new fee, that the fee is properly labeled on invoices and that they are prepared to work with any third-party sales tax compliance providers to understand how and whether the fee will be accounted for in existing filings. Taxpayers with questions about eligibility, registration, filing and payment should reach out to their sales and use tax advisers.
