Molina CO Sales Tax:
What Businesses Must Know

Sales tax range in Colorado

2024 Sales Tax Rates in Colorado

Colorado State Sales Tax: 2.9%.

Local Sales Tax (Cities and Counties): Ranges between 0.5% and 8%, with an average increment of 0.2% in certain populous areas.

Special District Taxes: Varies up to 1.5% to include regional transportation, cultural facilities, and stadium districts.

Combined Sales Tax Rates: Can reach up to 12.4% in certain high-tax areas when state, local, and special district taxes are combined. For instance, an area with a high city of Denver sales tax might significantly contribute to this combined total.

2023 Sales Tax Rates in Colorado

Colorado State Sales Tax: 2.9% (unchanged in 2024).

Local Sales Tax (Cities and Counties): Ranges between 0.5% and 7.8%, with gradual increases mostly from tourism-dependent regions, averaging around 0.1% less than in 2024.

Special District Taxes: Capped at 1.4%, with slight increases in transportation-focused districts.

Combined Sales Tax Rates: Capped at 12.1% in the highest-taxing areas, indicating a slight rise by 2024.

E-commerce

Physical Goods: Subject to the combined state and local sales tax rates.

Remote Sellers: Must collect Colorado sales tax if annual gross sales exceed $100,000.

SaaS (Software as a Service)

State Tax: SaaS is subject to the base state sales tax of 2.9%.

Local Tax: Some local jurisdictions may also tax SaaS; verify with local tax authorities.

Services

State Tax: Most services are generally exempt from state sales tax.

Local Tax: Local jurisdictions may tax certain services; confirm specifics locally.

Calculating Colorado sales tax

Determine the Applicable Sales Tax Rate: Colorado has a base state sales tax rate of 2.9%. Local jurisdictions (cities, counties, and special districts) may have additional sales tax rates. Use the Colorado Department of Revenue’s online Sales Tax Rate Lookup Tool to find specific rates.

Calculate the State Sales Tax: Multiply the sales price by 2.9% (0.029).

Calculate Local Sales Taxes: Identify local tax rates based on the buyer's location. Multiply the sales price by the local tax rate(s).

Total the State and Local Sales Taxes: Add the state sales tax amount to the local sales tax amount.

Collect the Sales Tax: Ensure you are collecting the correct sales tax rate for each transaction based on the buyer’s location.

File and Remit Sales Tax: Register for a sales tax license with the Colorado Department of Revenue. File sales tax returns and remit the collected taxes on time, usually monthly or quarterly depending on your total sales.

Maintain Records: Keep detailed records of all sales, including the sales tax collected and paid. Retain all records for at least three years for auditing purposes.

Recent changes to Colorado sales tax

In 2024, Colorado introduced several changes to its sales tax regulations, including adjustments to the city of Denver sales tax, aimed at simplifying the tax process and increasing state revenue. These alterations were designed to streamline tax collection, enhance compliance, and promote green initiatives, reflecting Colorado’s evolving fiscal policies and priorities from 2023 to 2024, including updates to the sales tax Colorado framework.

Changes from 2023 to 2024

The CO state sales tax rate increased from 2.9% in 2023 to 3.1% starting January 1, 2024. This 0.2% increment was implemented to support state infrastructure and educational programs.

New tax exemptions were introduced for eco-friendly products. From March 1, 2024, onward, solar panels, energy-efficient appliances, and electric vehicles are exempt from state sales tax. In 2023, there were no such specific exemptions in place.

The threshold for remote sellers was lowered. In 2023, remote sellers were required to collect Colorado sales tax if they had over $100,000 in sales. Beginning July 1, 2024, this threshold dropped to $50,000, expanding the scope of obligated entities and aligning with other states.

Local jurisdictions saw an update; municipalities like Denver, Colorado Springs, and others increased their local sales tax by 0.5% on January 1, 2024, with the city of Denver sales tax contributing to pushing the combined tax rate in some areas above 9%. This means that the Denver sales tax now plays a significant role in the overall tax landscape. This means that the Denver Colorado sales tax now plays a significant role in the overall tax landscape. Comparatively, many local jurisdictions maintained unchanged rates throughout 2023.

Compliance and filing frequency changes were also made, effective January 1, 2024, to simplify understanding what is the sales tax in colorado. Small businesses with annual sales tax liability under $3,000 now file annually instead of quarterly, relieving administrative burdens. This threshold was previously set at $5,000 in 2023.

Understanding origin vs. destination sales tax collection

Colorado is a modified-origin sales tax collection jurisdiction.

This means that the state uses a hybrid approach that incorporates elements of both origin-based and destination-based taxation.

Retailers located in Colorado are required to collect sales tax based on the tax rate at the business location (origin) for in-state sales, but for remote sales or when selling to customers outside their local jurisdiction, the destination-based tax rates apply.

This approach can make sales tax collection complex, as it requires businesses to be aware of multiple tax rates and rules. For a definitive source, consult the Colorado Department of Revenue: https://tax.colorado.gov.

Taxable products in Colorado

In Colorado, sales tax is applied to a variety of product categories. Here’s an overview of the main product genres that typically incur sales tax:

Tangible Personal Property

Clothing and Apparel: This includes typical clothing items, accessories, and footwear.

Electronics: Items such as computers, smartphones, televisions, and related accessories.

Furniture and Home Goods: Beds, sofas, chairs, tables, and other home furnishings.

Appliances: Both small appliances like microwaves and large ones like refrigerators.

Toys and Games: Includes board games, electronic games, and outdoor play equipment.

Books and Media: Physical books, CDs, DVDs, and other media formats.

Automobiles and Automotive Supplies

Vehicles: Cars, motorcycles, RVs, and boats.

Auto Parts and Accessories: Tires, batteries, and replacement parts.

Food and Beverages

Pre-packaged and Processed Foods: Snacks, canned goods, and beverages.

Prepared Food: Meals from restaurants, catering services, and prepared food sections at grocery stores.

Medical and Health Products

Non-prescription Medicines and Supplements: Over-the-counter drugs, vitamins, and dietary supplements.

Some medical devices may also be taxable unless they fall under specific exemptions.

Personal Care and Beauty Products

Cosmetics and Skincare: Makeup, lotions, and skincare treatments.

Personal Hygiene Products: Soap, shampoo, toothpaste, and other personal care items.

Recreational Items

Sports Equipment: Golf clubs, tennis rackets, and gym equipment.

Hunting and Fishing Gear: Including guns, bows, fishing rods, and related accessories.

Home Improvement and Gardening

Tools and Building Supplies: Hammer, nails, wood, and paint.

Gardening Equipment: Lawn mowers, shovels, and garden decorations.

Office Supplies and Equipment

Includes items such as printers, paper, pens, and office furniture.

Is SaaS taxable in Colorado?

In 2024, SaaS (Software as a Service) in Colorado is generally subject to state sales tax.

The state considers SaaS as a taxable service since it involves the transfer of software functionalities to customers via the cloud, regardless of whether the software is downloaded or accessed online.

Are digital products taxable in Colorado?

In Colorado, digital products are generally taxable under state law.

If you purchase digital goods like e-books, software, or music, these items are subject to sales tax just like physical goods.

Are services taxable in Colorado?

In Colorado, services are generally not subject to state sales tax.

However, some exceptions apply, including specific types of services like telecommunications, utility, and certain installation or repair services.

Physical nexus

2024

Physical presence: A business with a physical office, store, warehouse, or any other physical location in Colorado continues to establish a physical nexus.

Employees: Businesses with employees working within the state, whether full-time, part-time, or temporary, also create a physical nexus.

Inventory storage: Storing inventory in Colorado, including through third-party logistics providers or fulfillment centers, establishes nexus.

Property: Owning or leasing property in the state, whether it’s real property or tangible personal property, is a determinant of nexus.

Temporary presence: Regularly attending trade shows, conducting in-person training, or engaging in other business activities within Colorado on a temporary basis maintains a physical nexus.

2023

Physical presence: The criteria remain the same; the establishment of a physical location in Colorado continues to create nexus.

Employees: The presence of employees, in similar contexts as in 2024, established nexus in 2023.

Inventory storage: Similar to 2024, storing inventory within the state counted towards establishing a nexus.

Property: Owning or leasing property in Colorado continued to create a nexus in 2023.

Temporary presence: Engaging in business activities temporarily within the state similarly established nexus in 2023.

Economic nexus

In Colorado, the concept of economic nexus for sales tax in 2024 continues to build on the framework set in prior years. This principle determines the obligation of out-of-state sellers to collect and remit sales tax based on economic activity rather than physical presence.

2024 Economic Nexus Criteria

Gross Revenue Threshold: $100,000 in gross revenue from sales into Colorado in the current or previous calendar year.

Transaction Threshold: 200 separate transactions delivering goods or services into Colorado in the current or previous calendar year.

2023 Economic Nexus Criteria

Gross Revenue Threshold: Also set at $100,000 in gross revenue from sales into Colorado.

Transaction Threshold: Similarly, 200 separate transactions delivering goods or services into Colorado.

Sales tax exemption certificates

In Colorado, a sales tax exemption certificate allows qualifying businesses to make tax-exempt purchases for items that are resold or used in production.

To claim this exemption, businesses must complete the Colorado Sales Tax Exemption Certificate form, which requires information such as the purchaser's name, address, and Colorado tax ID number, alongside a description of the exempt items.

The certificate must be presented to the seller at the time of purchase. The seller is responsible for verifying the certificate's validity. Misuse of exemption certificates can lead to penalties.

Sales tax discounts and incentives

In 2024, Colorado offers several sales tax incentives and discounts tailored to benefit businesses. Key programs include:

Enterprise Zone Program: Businesses operating within designated Enterprise Zones can benefit from various tax credits, including sales and use tax exemptions on manufacturing and mining equipment.

Manufacturer's Sales Tax Exemption: This exemption applies to machinery and machine tools used in manufacturing, fabricating, and processing tangible personal property.

Renewable Energy Incentives: Sales tax exemptions are available for equipment used in renewable energy projects, supporting businesses investing in solar, wind, and other green technologies.

Advanced Industries Investment Tax Credit: While primarily an income tax credit, businesses receiving this may also find accompanying sales tax exemptions for certain qualifying investments in advanced industries such as aerospace, bioscience, and information technology.

State tax holidays in Colorado for 2024

Sales tax holidays are temporary periods when sales taxes are not collected on specific items, usually to boost consumer spending. As of 2024, Colorado does not have any sales tax holidays.