Last Updated on August 27, 2020
Most businesses starting in Colorado that are 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 find out who needs a sales tax license, what products and services are taxable, how to register for a permit and reporting requirements.
Who needs a sales tax license in Colorado?
A business must register as a retailer in Colorado when:
- A business has “nexus” (significant presence in the state) such as a retail store, office or warehouse where products are produced, stored and/or delivered
- Selling items at craft shows, fairs, seminars, conventions, etc in Colorado
- A Colorado on-line business selling products to Colorado residents
- An out-of-state business selling over $100,000 in taxable products to Colorado residents.
What products and services are taxable in Colorado?
There are a few exceptions, but almost all physical products are 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 to 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 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 such as music, movies, software are taxable in Colorado.
Most services aren’t taxable in Colorado, however there are a few exceptions.
- Short-term lodging
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, LLC)
- Business name
- Names, addresses, phone number and SSN of owners/officers/members
- Federal Employer Identification Number (FEIN), or SSN if a sole proprietorship with no employees
- Description of what products are being sold
- Principal place of business
- 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 sales of retail 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.
How much does a sales tax license cost in Colorado?
A sales tax license will cost in-state sellers $16 for each location, 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 2-3 weeks when applying by mail.
Do you have to renew your Colorado sales tax license?
Most sales tax license types need to be renewed at a cost of $16 every two years and expire at the end of each odd number year.
Sales tax reporting
How is sales tax collected?
When a business makes a sale of a taxable product or service, the business charges the appropriate sales tax rate to the customer. This tax is collected by the business who then sends it to the Colorado Department of Revenue.
How much sales tax is charged?
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 volume of annual sales, 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 the 20th day of the month following the reporting period, unless the 20th falls on a weekend or federal holiday, in which case 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 occurred.
Sales tax on purchases for resale
A business is able to 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 to document the items being purchased are for resale.
More information can be found with the Colorado Department of Revenue’s Sales Tax Guide.
If you have questions about the sales tax license, the Colorado Department of Revenue can be contacted by calling 303-238-7378.
Business owners can also visit a regional service center, which are listed below.
Denver Metro Service Center
1375 Sherman St.
Denver, CO 80261
Colorado Springs Service Center
2447 N. Union Blvd.
Colorado Springs, CO 80909
Pueblo Service Center
827 W. 4th St., Suite A
Pueblo, CO 81003
Grand Junction Service Center
222 S. 6th St., Room 208
Grand Junction, CO 81501
Fort Collins Regional Service Center
3030 S. College Ave.
Fort Collins, CO 80525