Every US state creates their own sales tax laws and regulations, and some states have more complex regulations than others. For example, Colorado’s regulations can be challenging due to the abundance of home rule cities. Home rule city regulations allow certain cities and jurisdictions to set their own sales tax rules and laws in addition to state laws, further complicating sales tax returns for companies in these cities.
Completing a Colorado sales tax return is a three-step process. Businesses must first identify their filing frequency and due dates, then prepare the return, and finally, file and remit sales tax. Following this process will help you to prepare for and complete your return smoothly and accurately.
What’s in this article?
- How to find your Colorado return due date
- How to prepare your Colorado sales tax return
- How to complete and file a Colorado sales tax return
How to find your Colorado return due date
The timing for filing a Colorado return depends on your sales tax liability. You’ll be required to file and remit sales tax either monthly, quarterly, or annually. Once you register for a Colorado sales tax permit, you’ll be assigned a filing frequency. In general, here’s how filing frequency is determined in Colorado:
|
Monthly sales tax collected
|
Filing frequency
|
|---|---|
| $15.00 or less | Sales tax returns may be filed annually |
| More than $15.00 and less than $300.00 | Sales tax returns may be filed quarterly |
| $300.00 or more | Sales tax returns must be filed monthly |
Colorado sales tax returns are always due the 20th day of the month following the reporting period. If the filing due date falls on a weekend or holiday, sales tax is generally due the next business day.
Once you begin filing returns, your filing frequency may change if your average monthly sales tax liability changes. Note that failure to file and remit by these deadlines could result in the following penalties:
- Late filing penalty: Greater of 10% of tax due plus 0.5% of tax due per month (maximum 18%) or $15
- Late payment penalty: Greater of 10% of tax due plus 0.5% of tax due per month (maximum 18%) or $15
In addition, Colorado requires any business with a sales tax permit to file a sales tax return on their due date, even if there isn’t any sales tax to report or pay. If you fail to file, Colorado will levy a late filing penalty—even if you don’t owe any sales tax.
How to prepare your Colorado sales tax return
The first step in preparing a return is to collect the sales information for the tax period—this may be a month, a year, or a quarter. Filing a sales tax return generally requires the following sales transaction information per jurisdiction:
- Gross sales
- Taxable sales by type
- Nontaxable sales by type
- Deductions such as shipping charges
- Total collected sales taxes
Note that if the amount of taxable sales does not reach economic nexus thresholds in Colorado, then a sales tax return might not be required. In addition to meeting economic nexus thresholds, if a business has employees, an office, or a warehouse located in Colorado and is selling taxable goods or services, then the business must collect sales taxes on all taxable transactions, file returns, and pay the appropriate amount to the state. If no sales were made during a filing period, the business must still file a return for $0.
Home rule cities
Colorado has over 70 home rule cities. This means that when making a sale to a buyer in a Colorado home rule city, you are required to collect Colorado’s statewide rate, any county or special taxing district rates, and the home rule city’s rate. This is the same process you would follow if you were collecting sales tax from a buyer whose ship-to destination was not in a home rule city.
The difference comes when it’s time to file Colorado sales tax. Colorado’s home rule cities require that you individually file and remit the sales tax collected from buyers in those cities to each home rule city.
Thankfully, the state released the Colorado Sales and Use Tax System (SUTS), an online portal through which sales tax filers can file and pay collected sales tax to approximately 40 of Colorado’s 70+ home rule cities. While SUTS makes it easier for sellers to file in home rule cities, sellers will still have to file in the remaining home rule cities not enrolled in the SUTS program. Sellers will also have to register separately for SUTS in addition to registering for a Colorado sales tax permit.
How to complete and file a Colorado sales tax return
The final step to completing a sales tax return in Colorado is to file and remit tax. The Colorado Department of Revenue website outlines the multiple ways businesses can file and remit sales tax, including online and physical mail options.
Colorado requires any business with a sales tax permit to file a sales tax return on its due date, even if it doesn’t have any sales tax to report or pay. If a business fails to file, Colorado will levy a late filing penalty, even if the business doesn’t owe any sales tax.