SALTy Tax Alert: Are you prepared for the NEW Colorado Retail Delivery Fee (RDF)?

SALTy Tax Alert: Issue 2022-20

Summary

Colorado has enacted a Retail Delivery Fee (RDF) effective July 1, 2022.?The RDF applies to all taxable retail sales including third-party sales delivered by a motor vehicle to a location in Colorado. The $0.27 fee should be charged, collected, and remitted by the retailer to the Colorado Department of Revenue based upon the current sales tax filing frequency and due dates.?It is filed on the new Form DR 1786.

In Detail

Who’s Impacted? Retailers and marketplace facilitators licensed to make sales in Colorado should remit the RDF on sales of taxable tangible personal property delivered in Colorado, including goods that are mailed, shipped, or delivered to a purchaser in Colorado. Examples of licensed retailers that must collect and remit RDF include but are not limited to restaurants and grocery stores, stores that require delivery (e.g., furniture, appliances, and electronic stores), online stores that ship orders, and business-to-business retail sales.

Transactions Subject to RDF: RDF applies to taxable sales of tangible personal property delivered in Colorado by a motor vehicle on each sale to a customer. The RDF fee does not apply if all items in the sale are exempt from tax. A sale includes all items purchased at the same time regardless of how many deliveries are needed to complete the sale. A separate RDF is charged on every sale even if combined into one delivery and is not associated with delivery charges. Retailers must list the RDF on the receipt or invoice. The RDF is $0.27 per sale and is a combination of the following fee types: Community Access Retail Delivery Fee ($0.069), Clean Fleet Retail Delivery Fee ($0.053), Clean Transit Retail Delivery Fee ($0.030), General Retail Delivery Fee ($0.084), Bridge and Tunnel Retail Delivery Fee ($0.027) and the Air Pollution Mitigation Retail Delivery Fee ($0.007).

Registration and Compliance: In-state and out-of-state retailers with an active sales tax account that reported a sales tax liability after January 1, 2021 will be automatically registered for a retail delivery fee account by July 1, 2022. No license or registration fee is required. Returns are due by the 20th of the month and filing frequency will mirror the filing frequency of the retailer’s sales or use tax return. A return is due for every period regardless of whether a fee is due in the period reported. The RDF is reported on the Retail Delivery Fee Return, form DR 1786.

Insights

There is no option to opt out of the automatic registration. Retailers that do not make taxable sales of tangible personal property for delivery by a motor vehicle will not be required to file an RDF return. Retailers that are not subject to RDF, but are automatically registered by the Department, can decide not to file the RDF returns and the account will be closed by February 28, 2023. However, while the account is open, retailers may receive notices from the Department suggesting they file the return, if applicable. Retailers may also close the RDF account through Revenue Online by submitting form DR 1108 or by contacting the Taxpayer Helpline at 303-238-7378.

For unregistered companies with physical and/or economic nexus, this RDF may be another potential costly liability. The State of Colorado is not offering an option to self-assess the fee. Sellers are required to separately state the RDF fee and collect it from customers based upon sales tax statutes barring self-assessment. The RDF can potentially be reduced by changing billing/invoicing frequency and combining taxable sales orders.

We are monitoring this topic for any legal challenges to the fee and the July 1 implementation date.?Armanino LLP is ready to assist with determining applicability, registration and/or filing, and potential additional nexus liability concerns.?

For additional information, please contact Lance Warren or Bernie Ottenlips.