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ACTION NEEDED: Colorado Retail Delivery Fee begins July 1, 2022

Overview

Beginning July 1, 2022, the state of Colorado is imposing a $0.27 Retail Delivery Fee (RDF) on all deliveries by motor vehicle to a location in Colorado with at least one item of tangible personal property subject to state sales and use tax. 

Retailers must separately state the retail delivery fee on all customer invoices and receipts.

Note: The fee is levied on all qualifying deliveries, even when shipping is free.

Who is impacted?

Retailers licensed to make sales in Colorado. Examples include, but are not limited to:

  • Restaurants that deliver
  • Grocery Stores that deliver
  • Flower delivery services
  • Sales that require delivery
  • Furniture
  • Appliances
  • Electronics
  • Online stores that ship orders
  • Business-to-business retail sales (excluding wholesale sales)

What transactions are subject to the RDF?

All retail sales that:

  • have at least one item delivered by motor vehicle and

  • include at least one item that is subject to Colorado state sales tax.

What are the State Registration requirements?

  • No registration fee
  • No additional license required
  • Retailers cannot opt-out of the automatic registration
  • For taxpayers with an active sales tax account, a retailer license, and any sales tax liability reported after January 1, 2021:
    • As a courtesy, the CO DOR will automatically register your business for an RDF account by July 1, 2022.
    • Additionally, any open out-of-state retailers or retailer’s use account holders will be automatically registered for an RDF account
  • Retailers who open accounts after July 1, 2022, or who don’t meet the criteria above, will be able to register:
    • through Revenue Online
    • by filing the Retail Delivery Fee Return, form DR 1786
    • or by submitting form CR 0100AP

What if my company is not required to file the RDF?

If you do not make retail deliveries that require the filing of the RDF return and do not file any RDF returns, the account will automatically be closed by February 28, 2023.

Note: If you do not file returns while the account is open, you may receive letters from the Department suggesting that you file a return if you are required to collect and remit the RDF.

Notices

If you do not make retail deliveries that require the filing of the RDF return and do not file any RDF returns, you may receive letters from the Department suggesting that you file a return if you are required to collect and remit the Retail Delivery Fee. Please do not submit these notices to Avalara.

If you do not wish to receive letters, you may close the Retail Delivery Fee account at any time:

  • through Revenue Online
  • by submitting form DR 1108
  • or by contacting the Taxpayer Helpline at 303-238-7378

How will the Retail Delivery Fee be supported in AvaTax? 

To support Colorado’s RDF, Avalara has created a new tax code that can be used to calculate the fee.

Tax code Description
OF400000 Colorado Retail Delivery Fee

How do I know if the RDF applies to my business?

You will need to evaluate your business to determine if Colorado’s Retail Delivery Fee applies to you. If it does, see the Resolution section below to learn about what you need to do by July 1, 2022. 


If in doubt about whether or not the fee applies to your business, contact the CO Taxpayer Helpline for clarification. For more information about Colorado’s Retail Delivery fee, see Colorado’s Retail Delivery Fee article

Environment

AvaTax

Resolution

If you are not a Returns customer, skip to Step 2.

  1. Create a new filing request.
    • You will need to create a new filing request in Avalara AvaTax, for the CO DR 1786 (Colorado Retail Delivery fee return)
      • Effective date 7/1/22 
      • Registration / account number will be the same as your company’s active sales tax account
      • Filing frequency will be the same as your company’s active sales tax account
  2. Adopt the Retail Delivery Fee Tax Code
    • If you’re managing your tax code mapping within AvaTax under the “What you sell” area, you will need to follow these steps to set up a new Item and map it to the new Tax Code. See Map the items you sell to Avalara tax codes.
    • If you’re managing your Tax Code Mapping within your integration, you will need to set up a new item and map it to the Colorado Retail Delivery Fee Tax Code.

       Note: Merchants subject to this fee will need to add a $0 line item to their orders with the OF400000 tax code.
  3. Pass the new Tax Code as a line on applicable transactions
    • When you determine the Retail Delivery Fee should be applied to a Colorado transaction, add a $0 Delivery Fee item as a separate line on the transaction using the new Item you set up in Step 2. The line amount for this Item should always be set to $0.
    • Depending upon how an integration displays tax amounts on an invoice, your integration technology partner may need to adjust the display to state the fee amount separately from the total tax. Avalara is currently testing and evaluating the impact of this change on supported connectors. We plan to update this help center article as soon as information is available. Please continue to monitor for updates.
  4. Verify the Retail Delivery Fee Calculation
    1. When the Retail Delivery Fee Tax Code is passed, you can verify it is working based on the presence of a $0.27 fee that is calculated on the line the Retail Delivery Fee Tax Code was passed on. 
    2. If applicable, you can test transactions in your Sandbox account on June 18, 2022 using the new Retail Delivery Code. 
    3. On June 27, 2022, you can begin entering transactions for the July 2022 period.

     Note: The Colorado RDF must be separately stated on invoices. Customers will need to configure this themselves within their integration, or work with their integration partner to have it configured to be separately stated.

  5. File your Delivery Fee Return
    • At the end of every filing cycle, you will need to file your Colorado Delivery Fee Tax Return. If you are a Returns customer, Avalara will be filing your return on your behalf. If you are not a Returns customer, you will be able to download a report in AvaTax to assist with filing the Colorado Delivery Fee Tax Return.

Additional Resources 

Frequently Asked Questions

Question Answer
Are there exemptions to the fee? If all of the property sold is exempt from Colorado state sales tax, the delivery will be exempt from the RDF. This includes sales that are entirely wholesale sales. Sales that include both exempt and taxable tangible personal property are subject to this fee when delivered by motor vehicle to a location in Colorado. A delivery that is made to a purchaser who is exempt from paying the state sales tax (such as a government or a charitable organization) is exempt from the RDF.
Will the Delivery Fee be refunded on refund transactions? No, the State of Colorado has indicated that the Delivery Fee is not refundable. AvaTax will not calculate the Delivery Fee on transactions where all physical lines have negative amounts.
Is this the only way to calculate the fee in AvaTax? Yes, at this time this is the only way for AvaTax to calculate the Retail Delivery Fee.
What should I do if I am a Returns customer and not able to use the Delivery Fee Tax Code?

You will need to make a Retail Delivery Fee adjustment on your Liability Summary (See this article for more information.)

  1. Use filters to find the CO DR 1786 summary, then select Go to view the liability.

  2. In the lower table, select the arrow icon to the left of the form name to view the liability summary details.

  3. Select Add Adjustments, then enter the adjustment details:

    • Adjustment type: Select one of the following adjustment types:

      • Colorado Retail Delivery Fee: a dollar amount collected for retail delivery fees.  If your company is passing tax codes (specific code to be entered here), you do not need to enter total fees

    • Period: Select if the adjustment applies to the current filing period 

    • Account type: The accounting type. Select one of the following:

      • Accounts payable

      • Accounts receivable

      • Both (this would be the selection if you want Avalara to remit this fee on your behalf)

      • None

    • Amount: Enter the dollar amount of the adjustment.

    • Reason: Enter a reason for the adjustment.

Will there be a report available to assist with filing requirements? Yes, a report will be made available in AvaTax prior to the first filing period for the Retail Delivery Fee.