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

Important note

Avalara product teams continue to work to assess the current solution to meet the Colorado Retail Delivery Fee requirements, as covered in this article. Avalara continues to partner with the ERP vendors, eCommerce platform and underlying connectors leveraged, to collectively explore available and reasonable alternative solutions that provide an improved experience. We will keep you updated through this article.  

Meanwhile, for detailed implementation and support questions on how to setup the Colorado Retail Delivery Fee as a new SKU and Tax Code, and to ensure correct posting of the fee to your financials with your existing integration, please consult the help center documentation specific to your accounting system.

For more custom integrations we recommend engaging with your preferred system integration partner to setup a new inventory item and new Tax Code.

Overview

Beginning July 1, 2022, the state of Colorado is imposing a $0.27 Retail Delivery Fee 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: that 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 retail delivery fee?

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 retail delivery fee account by July 1, 2022.
    • Additionally, any open out-of-state retailers or retailer’s use account holders will be automatically registered for an retail delivery fee 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 retail delivery fee?

If you do not make retail deliveries that require the filing of the retail delivery fee return and do not file any retail delivery fee 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 retail delivery fee.

Notices

If you do not make retail deliveries that require the filing of the retail delivery fee return and do not file any retail delivery fee 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 retail delivery fee, Avalara has created a new tax code that can be used to calculate the fee.

Tax code Description
OF400000 Colorado Retail Delivery Fee

In addition, as of August 4, 2022, AvaTax will provide a report to help with filing requirements. In AvaTax (as of August 4, 2022), go to Reports Transaction reports > Sales tax document reports (Report Category)> Colorado retail Delivery Fee Report (Report name).

How do I know if the retail delivery fee 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. Schedule the retail delivery fee return.
    • You will need to create the return in Avalara AvaTax, for the CO DR 1786 (Colorado Retail Delivery fee return)
      • Effective date 7/1/22 
      • Your registration ID / account number will be the same as your company’s active sales tax account with ‘RDF’ as the suffix
        Find your account number by logging into the Colorado e-filing website and check the details of your state Retail Deliver Fee account.
        Example account number: 12345678-123-RDF
      • 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 determine when this fee applies, and add a $0 line item with the OF400000 tax code to any orders that are subject to the retail delivery fee.
  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.

      clipboard_e2eae8147c091ea2dd4ed0b1209198ae3.png  

      Important

      AvaTax doesn't currently consider the taxability of your products when calculating the fee. If you determine that the fee shouldn't apply because all of the physical products in the delivery are non-taxable, don't add the OF400000 line item.

    • 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 by looking for a $0.27 fee that is calculated on the line item with the retail delivery fee tax code OF400000.
    2. If applicable, you can test transactions in your Sandbox account on June 18, 2022 using the new Retail Delivery Code. 
    3. On June 28, 2022, at 10:30 a.m., you can begin entering transactions for the July 2022 period.

     Note: The Colorado retail delivery fee 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 can file the 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 retail delivery fee. 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 retail delivery fee.

Note: AvaTax doesn't currently consider the taxability of your products when calculating the fee, so it's important that you keep track of which of your transactions are subject to the fee.

Does Avalara determine which of my transactions are subject to the retail delivery fee?

Avalara checks to make sure that the transaction includes at least one physical product line item with a positive dollar amount. The fee isn't calculated if the transaction doesn't include at least one physical product with a positive dollar amount.

AvaTax doesn't currently consider the taxability of your products when calculating the fee. If you determine that the fee shouldn't apply because all of the physical products in the delivery are non-taxable, don't add the OF400000 line item.

Adding the retail delivery fee tax code OF400000 to transactions that aren't subject to the fee can result in over-collection of the fee.

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.
I received a notice that the city of Aurora will be taxing the fee. Does Avalara calculate Aurora city tax on the fee? At this time, Avalara does not calculate Aurora city tax (or any other home rule city tax) on the retail delivery fee. We're working to add this functionality as quickly as possible.

I sell on an e-commerce platform, and can't manually add the retail delivery fee tax code to my customer's shopping cart. What should I do?

Adding the retail delivery fee as a line item works best for platforms that allow you to manually add line items to an invoice. This approach may not be possible in most e-commerce platforms, or in other platforms where your customer can complete the transactions on their own. 

In this case, you can use Avalara reports to find the total number of transactions subject to the retail delivery fee.

If Avalara files your returns, you can add that total fee amount as 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

    • Amount: Enter the dollar amount of the adjustment.

Will there be a report available to assist with filing requirements?

Yes: as of August 4, 2022, AvaTax will provide a report to help with filing requirements.

In AvaTax (as of August 4, 2022), go to Reports Transaction reports > Sales tax document reports (Report Category)> Colorado retail Delivery Fee Report (Report name).