In May 2022, the Colorado Department of Revenue (CDOR) notified retailers of a new Retail Delivery Fee (RDF) to be charged on all deliveries made by motor vehicle to a location in Colorado of tangible personal property subject to state sales or use tax. Retailers must begin charging and collecting the RDF effective July 1, 2022. The RDF is set at $0.27 per taxable sale.
Who Does the Retail Delivery Fee Apply To?
The RDF is imposed upon the purchaser of taxable tangible personal property delivered by motor vehicle to a location within Colorado and will be collected and remitted to the CDOR by the retailer or marketplace facilitator who sold the property. The RDF applies regardless of whether the retailer owns or operates the motor vehicle used to deliver the goods to the customer, hence the RDF will apply even if a retailer uses a third-party delivery service. However, if a third-party delivery service collects and remits sales or use tax on the retailer’s behalf, the third party would also be required to collect and remit the RDF, thus relieving the retailer of its liability.
How Will the Retail Delivery Fee Be Applied?
The RDF is due on all deliveries made by motor vehicle of taxable tangible personal property to a location in Colorado. Consequently, the RDF will not apply to wholesale sales, sales to locations outside of Colorado, or retail sales where every item in the transaction is exempt. However, if any part of the transaction is subject to sales tax, the RDF will apply despite the exempt status of the remainder of the items in the transaction. Additionally, the RDF applies if the retailer has to use a motor vehicle to transport the items at any point after the items are sold, even if the goods are not delivered directly to the purchaser (for example, if the goods are transported within Colorado from a warehouse to a store and are subsequently picked up by the purchaser). Finally, the RDF still applies even if shipping is free to the purchaser.
Collecting and Remitting the Retail Delivery Fee
Retailers must charge the RDF by listing it as a separate line item called “Retail Delivery Fees” on each receipt or invoice issued to the purchaser. Thus, if a customer purchases multiple items at the same time, only one RDF is due regardless of how many deliveries are actually needed to complete the sale. However, if each item is purchased at different times, the RDF is due on each sale, even if only one delivery is needed to complete the sale. The RDF is collected at the state level and does not need to be separated by jurisdiction.
By July 1, 2022, both in-state and out-of-state retailers with an active sales tax account, a retailer license, and any sales tax liability reported after January 1, 2021, will be automatically registered for a RDF account. This account is separate from the retailer’s Sales and Use tax account and does not require a registration fee.
Retailers who have an existing tax account with the CDOR but are not automatically registered under the aforementioned parameters have several options to create a Retail Delivery Fee account: using Colorado’s Revenue Online system, completing and filing a paper Form DR 1786, or, beginning in late 2022, using Colorado’s Sales and Use Tax System (SUTS). Retailers without an existing tax account with CDOR can use Form CR 0100AP, the Colorado Sales Tax and Withholding Account Application to add a RDF account.
Retailers will only be required to file one return (Form DR 1786) for all locations (sites) in Colorado and the return is due at the same time as the retailer’s sales tax return. A return still must be filed even if no RDF is due for the reporting period.
GBQ will provide updates as warranted if additional guidance is provided by the CDOR. Please contact your GBQ representative if you have questions or if you would like to discuss the foregoing in greater detail.