Colorado is one of most difficult states for ecommerce businesses in terms of complying with sales and use tax regulations. The main reason for this is because Colorado is a Home Rule state. As a reminder, a home rule city administers its own city sales tax and the laws regarding sales tax may differ from those established by the state in which it is located. Home rule cities operate as self-collected cities because they administer and collect their own city sales tax. The state has no jurisdiction over sales and use taxes imposed by these cities. City taxes collected for such areas must be remitted directly to the home rule city. In contrast to that, a statutory city imposes the city sales tax based on rules established by the state in which it is located.
There are two types of Colorado sales tax licenses: The Standard License and the Special Event License. The Standard License is described as being for businesses with one or more permanent locations in Colorado. This would be the license an ecommerce retailer that has nexus with the state would need to apply for. The second type of license is the Special Event License, which is for 1) businesses that have no permanent place of business but sell goods at fairs, festivals, bazaars, etc.; and 2) businesses that meet the requirements for a Standard License, but also sell at other locations, such as fairs and festivals. Flea markets, which are held on a regular basis, are not considered special events.
Ecommerce businesses (or anyone in need of a license) can apply for a state sales tax license online to receive their Colorado Account Number (CAN) license number immediately. This site can be confusing and is not well built. It is combined with Colorado’s Department of Labor, which administers the state’s Unemployment Insurance. When navigating the Department of Revenue’s site to apply for a sales tax license, the site will ask a lot of questions about employees and at one point will incorrectly advise you are unable to continue with the application until you contact the Department of Labor. Ecommerce Retailers, if you have no employees in the state and you receive this warning when applying
online, ignore it and scroll to the bottom of the page where you will see an option to continue despite the warning.
If you are unable to apply online, you may complete and submit the “Sales Tax/Withholding Account Application” (CR 0100). Complete and submit the form by mail or take the CR 0100 to any Taxpayer Service Center located in Colorado. You will receive your license and account number by mail if you choose to mail in the application. Please allow four to six weeks for processing these requests.
The fee for a two-year license is $16, plus a one-time-only $50 deposit. The deposit is automatically refunded to the business after $50 in state sales tax has been remitted to the department. However, if a retail business fails to remit sales tax to the department, the deposit will not be refunded. Under Colorado law the deposit is only refundable to the extent the business remits sales tax. For example, if a retail business collects and remits $30 in state sales tax, the department will then refund only $30. If a business fails to remit any sales tax, no portion of the $50 deposit will be refunded regardless of the length of time the business is open. Standard sales tax accounts must be renewed every two years at a fee of $16.
If a retailer with a Standard License elects to participate in a special sales event within the state, the retailer must also obtain a special event sales tax license, however, there is no fee associated with the application if the business has a valid Standard License.
The Colorado Department of Revenue is responsible for collecting and administering local sales taxes for all statutory cities that impose a sales tax. Sales taxes collected in these areas are reported on the DR 0100 and remitted to the Colorado Department of Revenue. Home-rule cities that collect their own local sales taxes should be contacted directly for their tax laws and regulations. Home Rule jurisdictions may also require a license if you have nexus in their jurisdiction. For information on which cities are home-rule and how to contact them, see Colorado’s publication “Sales/Use Tax Rates” (DR 1002) .