The Colorado legislature passed legislation in 2021 (Senate Bill 21-260) authorizing several new fees to increase funding for transportation. Fees are commonly used in Colorado to increase revenue without running afoul of the state’s Taxpayer Bill of Rights (“TABOR”) which requires new taxes to be approved by general referendum. Senate Bill 21-260 was signed into law by the Governor with a scheduled July 1, 2022 effective date.
The new fees are inflation-adjusted each year and include fees on gasoline, diesel, retail deliveries, rental vehicles, and electric vehicle registrations. In May 2022, due to increases in gasoline and diesel prices, the legislature voted to postpone the additional gasoline and diesel fees until April 1, 2023.
What is the Retail Delivery Fee?
SB 21-260 includes a new Retail Delivery Fee. The Retail Delivery Fee is structured similarly to a sales tax, except that it is imposed as a flat fee per “retail delivery,” rather than a rate times taxable base. This Retail Delivery Fee becomes effective on July 1, 2022.
Essentially, the new Retail Delivery Fee is a flat $0.27 fee collected by retailers for each “retail delivery” in the state. A retail delivery is a sale to a customer in Colorado that contains at least one piece of tangible personal property and is delivered by a motor vehicle, including by third-party common carriers. A retail delivery only involves deliveries to end-users and does not include sales to retailers by wholesalers. Additionally, each sale for delivery is considered a single “retail delivery,” regardless of how many actual deliveries are needed to fulfill the order.
The Retail Delivery Fee is comprised of six smaller fees but is represented on an invoice by just a single charge for the combined fee. The fee is indexed to inflation rates meaning it will change annually.
Who is Responsible for the Retail Delivery Fee?
The fee is imposed on the person(s) or entities that purchase tangible personal property delivered by a motor vehicle. It is collected by the retailer or marketplace facilitator on each retail delivery even if delivered by a third-party common carrier. Essentially, whomever is collecting sales tax is required to collect the fee.
The enacting legislation does not provide direct exemptions to the Retail Delivery Fee. However, by definition, it is only imposed on items that the sales tax is already imposed on. So, a sale exempt from sales tax would also be exempt from the Retail Delivery Fee.
How is the Retail Delivery Fee Remitted?
The Retail Delivery Fee will be reported and paid on an all-new form (DR 1786). The new form is filed on the same schedule as the company’s sales tax return. Entities in Colorado can file either annually, quarterly, or monthly, depending on their taxable sales. DR 1786 is only filed at the state level and does not need to be separated by jurisdiction.
How Do You Register for the Retail Delivery Fee?
The Retail Delivery Fee will have a separate account from sales tax. Businesses registered for Colorado sales tax prior to July 1, 2022, will be automatically registered for the Retail Delivery Fee.
After July 1, 2022, there are several ways to obtain an account:
- Existing sales tax accounts can use Revenue Online to add a retail delivery fee account
- File a DR 1786 (a new account will be created)
- Register using the Sales and Use Tax System (SUTS)
The new Retail Delivery Fee presents a new reporting obligation for certain retailers operating in the state of Colorado. Learn more about what this could mean for your organization.