If you have a sales tax nexus in Colorado and sell tangible goods or services, you are required to register for and collect Colorado state and local sales taxes. Using a simple sales tax calculator, you can determine the correct combined Colorado state and local rate to charge your customers. Colorado sales tax rates vary by county and city and can be as high as 11.2%. In addition, the state sales tax is 2.9%. Most tangible personal property is taxable, except groceries, prescription drugs, and medical equipment. Certain vehicles and short-term rentals are also exempt from Colorado sales tax.
The Supreme Court has overruled the physical presence requirement and now states can require retailers to collect sales tax based on their virtual connections to the state, known as economic nexus. The Colorado Department of Revenue has multiple ways to file and remit sales tax, including online, by mail, or with a commercial software program.
When submitting your sales tax payments, be sure to include your eight-digit Colorado Account Number (CAN) on the payment. Failure to include your CAN can delay posting your payment and may result in a balance due notice from the Department of Revenue.
How to File Colorado Sales Tax?
Every state has its own set of sales tax rules and regulations. In some states, you are required to collect sales tax based on your location (origin-based sourcing), while in others it is based on your buyer’s location or destination (destination-based sourcing). The state of Colorado also has many home-rule cities that have their own local laws and regulations in addition to the state laws.
Filing your Colorado sales tax return can be confusing and complicated, especially if you have multiple locations or use different sourcing methods. To make things easier, you can use a free tool to manage all your sales tax filings and payments in one place. When submitting your Colorado sales tax payment, be sure to include your eight-digit business tax ID number, known as the Colorado Account Number (CAN). Doing so ensures that your payment is posted accurately to your account.
Colorado Sales Tax Due Dates
Once your business has registered with the Colorado Department of Revenue and begun collecting sales tax, it is important to keep track of the state’s filing deadlines. These due dates will help you avoid costly mistakes and penalties for late filing.
The due date of a sales tax return is the 20th day of the month following the reporting period. If the due date falls on a weekend or holiday, the return is due the next business day. In addition to the due date, businesses must keep accurate sales tax records for three years.