Colorado to Impose New Sales and Use Tax Penalties and Fees

Effective July 1, 2022, Colorado will impose new penalties on sales and use tax refund claim filers and a new retail delivery fee on sales and use taxpayers in Colorado.

Sales and Use Tax Refunds

House Bill 22-1118, signed into law on April 21, 2022, will impose a penalty on filers of sales and use tax refund claims that are determined to be incomplete, duplicative of another claim, or lacking reasonable basis in law or fact. If the claim filed exceeds $5,000, a civil penalty of 5% of the entire claim will be imposed if it is determined to be incomplete, and a civil penalty of 10% of any part of a refund claim that is duplicative or lacking reasonable basis on law or fact will be added. These civil penalties will be imposed in addition to other penalties provided by law. Regulations will be forthcoming to establish the documentation required for a complete claim. Refund filers will be notified by the Department of Revenue if the claim filed is incomplete, identifying missing items. The claim must be perfected or withdrawn within 60 days to avoid penalties being imposed. The penalties may be waived if it can be established that the duplicative claim was unintentional and was either minimal or immaterial or if “good cause” can be shown. These penalties are scheduled to expire on July 1, 2030.

Retail Delivery Fee

Also, effective July 1, 2022, all retailers or marketplace facilitators delivering tangible personal property in the state will be subject to a new retail delivery fee that was passed last summer. Although not a tax, the new fee is imposed on every delivery by motor vehicle to a location in Colorado with at least one item of tangible personal property that is subject to sales and use tax. The new fee is composed of six individual fees, such as a Clean Transit fee and a Bridge and Tunnel fee, totaling $.27 for each retail delivery in the retailer’s own vehicles or third-party vehicles to a purchaser in the state. If every item in the retail sale is exempt from sales tax, the delivery is also exempt from the retail delivery fee.     

Any retailer with an active sales tax account or retailer license as of January 1, 2022, will automatically be registered for a retail delivery fee account by July 1, 2022. This applies to both in-state and out-of-state retailers. No registration or license fee is required. The collections of the fee will be reported on a new form, DR 1786, on the same monthly, quarterly, or annual basis used for the retailer’s sales and use tax reporting. The new fee is collected on a state-wide basis per sale, not per item, and does not need to be separated by jurisdiction. The fee is imposed on the purchaser and must be listed separately on the invoice as “retail delivery fee.”        

Make sure you understand the implications of these new tax penalties and fees before they go into effect on July 1, 2022. Please contact one of the Ryan Sales and Use Tax professionals listed below.

TECHNICAL INFORMATION CONTACTS:

Landon Julius
Principal
Ryan
913.338.2005
landon.julius@ryan.com

Kate Stodola
Manager
Ryan
720.524.0022
kate.stodola@ryan.com

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.