A new 27-Cent Colorado Retail Delivery Fee Adds Up Quickly

The Colorado State Legislature in 2021 passed Senate Bill 21-260, a nearly $5.4 transportation bill that tackles several large items at the same time including fixing and expanding highways and boosting various transit projects.

Included in the new law are six new road-user fees that are projected to raise billions of dollars — and will affect most people in the state — all while maneuvering around state fiscal roadblocks, like TABOR (Taxpayer’s Bill of Rights), that would have required going to voters to pass tax increases.

 “TABOR’s restrictions in the Constitution do not apply to what is called ‘“fees,’” said Jeffery Zax, Professor and Associate Chair of Undergraduate Studies at the University of Colorado-Boulder. “When the government can charge a specific fee for a service that is outside the restrictions that TABOR imposes, so it is possible for the government to provide some services where it is reimbursed directly.”

Colorado Retail Delivery Fee Requirements

The new fees include a Retail Delivery fee, which is a 27-cent delivery fee that will apply to orders — including those made online — for goods and most other items subject to sales tax, including restaurant food. The retail delivery fee is remitted to the Colorado Department of Revenue.  

Others include:

• Electric Motor Vehicle Registration Fees
• Gasoline and Diesel Fuel Fees
• Passenger Ride Fees
• Road Usage Fees
• Short-Term Vehicle Rental Fees

“It was part of a comprehensive transportation sustainability legislation in Senate Bill 21-260 that was passed in the 2021 Legislative session,” said Josh Pens, Director of Tax Policy for the Colorado Department of Revenue. “It did a number of things, but as far as the Department of Revenue is concerned, it created new fees for us to administer including the Retail Delivery Fee, which is expected to produce (about) $150 million in revenue every fiscal year.”

Look Out For the 27-cent Fee on Your Deliveries

Effective July 1, the state of Colorado started imposing a retail delivery fee on all deliveries by motor vehicle to a location in Colorado, even if the delivery originates in a different state. 

The retailer or marketplace facilitator that collects sales tax on taxable items delivered in Colorado is liable to collect and remit the retail delivery fee. Therefore, if a third-party delivery service handles 100 percent of a business’s deliveries and collects and remits the sales tax on all those deliveries, that business will not be liable to collect and remit the retail delivery fee.

Retail Deliver Fee Coincides with Sales Tax Return

The retail delivery fee is due at the same time as sales tax returns. Returns are generally filed on a monthly basis and must be filed on or before the 20th day of the month following each reporting period. Retailers permitted to file state sales tax returns on a quarterly, annual, or another basis will file the retail delivery fee return on the same schedule.

The retail delivery fee will be reported and paid on a new return, Form DR 1786. The retail delivery fee is collected state-wide, does not need to be separated by jurisdiction, and is calculated per sale. The retail delivery fee is made up of six different fees. 

 Retailers that make retail deliveries must show the total of the fees on the receipt or invoice as one item called “retail delivery fees.”.

If every item in a retail sale is exempt from sales tax, the delivery is also exempt from the retail delivery fee. However, if one or more items in the transaction is subject to sales tax, the retail delivery fee is due. Each sale for delivery is considered a single “retail delivery” regardless of how many shipments are needed to deliver the items purchased.

As a courtesy, on July 1, retailers with an active sales tax account, a retailer license, and any sales tax liability reported after Jan. 1, 2021, were automatically registered for a retail delivery fee account. Open out-of-state retailers or retailers’ user account holders were also automatically registered. There is no license required or registration fee due.

Pens said the DOR does not have any particular insights on how the retail delivery fee impacts businesses of different sizes. 

“The fee is imposed upon the purchaser, so the retailer’s role is to collect the fee and pay it over to the state,” he said. “As such, the impacts are going to be driven primarily by the costs of collection and return preparation.”

States Look at Revenue Alternatives

 Zax said states like Colorado are having to find new ways to generate revenue.

“The way governments ordinarily work is they provide services that are available to many or all of the citizens, and they pay for it with taxation,” he said. “What that means is the link between who pays and who receives can be broken by the government, and that is often a good thing because the government wants, in part, to provide services for people who are in need, and that is going to be funded by people who have fewer needs and more resources. Increasingly the state government has to turn towards fees in order to fund specific services because it is not able to raise the taxes that people might be willing to pay to get these services. Fees are limited in how they can be used because they have to be used to fund the services for which the fees are charged.”

For more information about Colorado’s Retail Delivery Fee visit https://tax.colorado.gov/retail-delivery-fee.

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