Most businesses starting in Colorado selling a product, and some services will need to register for a sales tax license. This is commonly referred to as a sales tax permit, seller’s permit, sales tax number, or sales tax registration.

Check out the rest of this guide to determine who needs a sales tax license, what products and services are taxable, how to register for a permit, and reporting requirements.

Also See: Guide to Starting a Business in Colorado

Who needs a sales tax license in Colorado?

A business must register as a retailer in Colorado when:

A business has “economic nexus” (physical presence in the state) when they have a physical location like a retail store or office or uses a warehouse or fulfillment center to store inventory.
Selling items at craft shows, fairs, seminars, conventions, etc. in Colorado
A Colorado online business selling products to Colorado residents
A remote seller selling over $100,000 in taxable products to Colorado residents.

What products and services are taxable in Colorado?

Physical products

There are a few exceptions, but almost all tangible personal property is taxable when sold at retail in Colorado. Common examples include:

General merchandise like furniture, appliances, and clothing
Titled or registered items like vehicles

Groceries, prescriptions, gasoline, and some farm implements are tax-exempt.

Labor, in most cases, isn’t taxable in Colorado. For instance, let’s say you broke the screen of your cell phone and take it to a cell phone repair shop to have it fixed. Sales tax would be added to the selling price of the new screen and any additional parts to fix the phone. The labor to replace the screen isn’t taxable. However, a business that makes furniture will indirectly have a sales tax on labor. In this instance, let’s say this business is building a dining room table for a customer. Through labor, the pieces of wood are shaped, sanded, and painted to build this piece of furniture. While the labor isn’t directly taxable, sales tax is charged to the final selling price of the table.

Digital Products

Digital products such as music, movies, and software are taxable in Colorado.

Services

Most services aren’t taxable in the state of Colorado, however, there are a few exceptions.

Short-term lodging
Renting or leasing tangible personal property
Catering

Services are not taxable in Colorado under state statutes C.R.S. 39-26-102(15)(a)(I).

How to register for a sales tax license in Colorado

State Sales Tax License Registration

A sales tax license can be obtained by registering through MyBizColorado or by mailing in the Sales Tax / Wage Withholding Account Application (CR 0100) form.

Information needed to register includes:

Type of business entity: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC)
Business name
Name, address, phone number, and SSN of owners/officers/members
Federal Employer Identification Number (FEIN) from the IRS, or the owner’s Social Security Number if a sole proprietorship with no employees
Description of what products are being sold
Principal place of business
Seasonality
Filing frequency
Date business activities began or will begin
Employee information

There are multiple sales tax license types a business can pick from, which include:

Standard Retail License (Sales Tax License) – Most common sales tax license for a business with a permanent location and sales are conducted on a regular basis. If the business has both retail and wholesale sales, only the standard license needs to be applied for.

Wholesale License – For a business only selling to vendors.

Single Special Event License— For a business with a Standard Retail License that also sets up a temporary location for one non-recurring event a year (such as an annual festival) and there are three or more vendors. This license is free for all standard license holders.

Multiple Special Event License – Similar to the Single Special Event License, businesses planning on having more than one special event can apply for the Multiple Special Event License that allows them to attend multiple events and/or when there are three or more vendors at the event (such as a Farmer’s Market). This license is also at no cost for Standard Retail License holders.

Exempt License for Contractors – Contractors purchasing construction and building materials for tax-exempt organization projects can obtain this license.

Small Home Businesses – Business owners operating out of their home can get this license if they:

Make occasional retail sales of products from their home
Total sales are less than $1,000 per year and
Do not have a member of the household in business selling similar items.

Home-Rule City Sales Tax License

In addition to the state sales tax license, businesses operating out of a home rule city will need to register directly with that city. Here is a list of home-rule cities.

A business will have to first register with the state before registering with their home-rule city.

Sales tax reporting

How is sales tax collected?

When a business sells a taxable product or service, the business charges the appropriate sales tax rate to the customer. This tax is collected by the company and then sends it to the Colorado Department of Revenue.

How much is sales tax in Colorado?

The sales tax rate that is charged varies depending on the address of the business if the purchase is made or shipped from a business located in the state. If the seller is based out of the state, the sales tax rate is based on the buyer’s address.

In addition to the statewide tax, there are additional sales taxes that may be added by cities, counties, and special districts. The Colorado Department of Revenue has a publication with Colorado Sales/Use Tax Rates (Form DR 1002) to determine how much sales tax to charge.

When are Colorado sales tax returns due?

The Department of Revenue will determine a filing frequency based on the expected annual sales volume, which will be monthly, quarterly, or annually. A business collecting over $300 in sales tax monthly will file monthly. The frequency is re-evaluated annually.

Filings are due on the 20^th day of the month following the reporting period, unless the 20th falls on a weekend or federal holiday, which would move to the next business day.

Even if the business had no sales during the reporting period, a filing is still required indicating no sales.

How much does a sales tax license cost in Colorado?

The filing fee for a sales tax license in Colorado is $16 for each location in the state for in-state sellers, in addition to a $50 deposit, which will be refunded after the first $50 in sales tax is paid. Out-of-state sellers will apply for a Retailer’s Use Tax License, which is free.

How long does it take to get a Colorado sales tax license?

Typically, a sales tax license will be approved the same day when applying online through MyBizColorado or 2 to 3 weeks when applying by mail.

Do you have to renew the Colorado sales tax license?

Most sales tax license types need to be renewed at the cost of $16 every two years and expire at the end of each odd number year.

How do I get a wholesale license in Colorado?

A business can purchase items to resell without paying state sales tax. The tax liability is passed from the distributor to the retailer, who will then charge sales tax to the end-user of the item.

Wholesalers and distributors will require a sales tax number and a Colorado Sales Tax Exemption Certificate (also referred to as a wholesale license, reseller’s permit, or resale certificate) to document the items being purchased are for resale.