In this article, you will learn:
Obtaining a Colorado sales tax license and collecting sales tax is mandatory if you are doing business in Colorado. You are a retailer doing business in Colorado if:
- you are selling, leasing, or delivering tangible personal property or taxable services in Colorado or
- engaging in any activity in Colorado that is related to selling, leasing, and delivering tangible personal property or taxable services for storage, consumption, use, or distribution in Colorado.
Colorado Department of Revenue is the apex authority responsible for administering Colorado state taxes, licenses, and tax collection including the issuing of Colorado sales tax licenses.
If you are a business that wants to sell goods and services in Colorado, you must know Colorado sales tax licensing rules and requirements, your liability to collect sales tax on the goods or services sold in Colorado, the sales tax rates you need to charge, how and where you should apply for a Colorado Sales tax license, how to collect and file sales tax returns, and whether you are exempted from state sales tax licensing and collection requirements as a business.
Don’t know where to begin? Don’t worry as in this article, we will let you know everything right from determining your sales tax nexus with Colorado to Colorado sales tax license requirements, cost and application, and filing sales tax return.
Also Read: Digital Sales Tax Demystified: Tips For E-commerce Success
Do I Need A Sales Tax License Colorado?
To know if you need a Colorado sales tax license to do business in Colorado and collect sales tax on goods and services sold in Colorado, you must first determine a sales tax nexus with Colorado.
What is Nexus?
Nexus determines the level of connection between the taxing jurisdiction (Colorado in this case) and the entity (your business entity in this case). Before doing business in a specific state, it is necessary for any business entity to determine the nexus between itself and the state it will be doing business in to know if it is liable to collect sales tax and remit the same to the state in which it will be selling it’s good and services.
A nexus must be established before the taxing jurisdiction can impose taxes on the business entity. Thus, Colorado must have some link or connection with your business entity to require you to apply for a state sales tax license and collect sales tax on goods and services sold in Colorado.
Each state has different types of nexus legislation which must be studied to know if a business entity has created a nexus in a state and is subject to the state’s obligations.
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When Does My Business Entity Create a Nexus In Colorado?
The type of nexus you create in Colorado depends on whether you are an in-the-state business or an out-of-the-state business.
1. In-the-State Business or Physical Presence Nexus
As per physical presence nexus, if you are a retailer doing business in Colorado, you are obligated to apply for a Colorado state sales tax license and collect sales tax if you have a place of business in Colorado directly, indirectly, or via a subsidiary. Such a place of business could be:
- an office
- a distribution facility
- warehouse
- storage facility
- the home office of a Colorado resident employee
- salesroom
2. Out-Of-The-State-Business or Economic Nexus
As per economic nexus, you can be a retailer doing business in Colorado even if you do not have or maintain a physical place of business in Colorado.
This is possible if you solicit business and receive orders from Colorado residents via any means and meet the annual sales threshold set by the state of Colorado for economic nexus to apply to you as a retailer.
The solicitation may be undertaken by any of the following:
- Direct, indirect, or manufacturers’ residents
- Distribution of catalogs or other advertising
- Use of any communication media
- Use of the newspaper, television, or radio advertising media
- However, economic nexus may not apply if you meet the small retailer exemption set by the state of Colorado.
However, you do not create an economic nexus with Colorado if you are a retailer who meets the small retailer exemption set by the state. Let’s have a look at the annual sales threshold for retailers who do not have a physical place of business in the state of Colorado but are still liable for Colorado sales tax licensing and collection requirements.
Annual Sales Less Than $100,000
If you are a retailer who does not have a physical place of business in Colorado whose annual retail sales of tangible personal property, commodity, and/or services in the state of Colorado both for the previous and the current calendar years is less than $1,00,000, you are exempted from Colorado sales tax licensing and collection requirements by the state.
However, you must, as a retailer, notify all your costumes of their obligation to pay Use Tax to the Colorado State Department of Revenue.
As a non-collecting retailer, you must do all of the following:
- Give a transactional notice to all the purchasers
- Give an annual purchase summary to all the Colorado purchasers by January 31 each year
- Give an annual customer information report to the Department by March 31 each year
Annual Sales More Than $100,000
If your retail sales in Colorado exceed $100,000 in the current year, you must apply for a Colorado Sales Tax License and start collecting Colorado Sales Tax. This must be done by the first day of the first month starting at least 90 days after the retailer’s total Colorado sales in the current year exceeds $100,000.
Suppose you fail to apply for and obtain a sales tax license and start collecting sales tax within the stipulated time. In that case, you are liable for all applicable state and state-controlled sales taxes for any subsequent sales made into the state of Colorado.
Also Read: How To Calculate And Pay Sales Tax In Your Country?
How To Apply for a Colorado Sales Tax License Online?
Once you establish a nexus with the state of Colorado, the next step is to apply for a Colorado sales tax license. You need to follow the below-mentioned steps to apply for a sales tax license in Colorado:
1. Keep SSN, FEIN, Trade Name, and ID Proof Handy
You need to keep a few things ready before applying for a sales tax license with the State of Colorado. Use https://mybiz.colorado.gov/intro and answer all the questions to know things you’ll require to register for a Colorado sales tax license. These requirements are based on:
- Whether or not you have filed your trade name or business with the Colorado Secretary of State
- If your company has or will have employees in the next 90 days
- Whether you sell or rent things or only provide non-taxable services
Accordingly, you may need the following things for which you will have to file application documents with the respective state/federal agencies:
ITIN or SSN
Individual Tax Identification Number or Social Security Number that is issued by the IRS and Social Security Agency(SSA) respectively. Where SSN is an identity number issued to all US citizens and eligible US residents, ITIN is for non-residents, resident aliens, their spouses, and dependents, who cannot get an SSN.
FEIN
Federal Employer Identification Number (FEIN) is issued by the IRS and is used to identify a business entity. You must have a FEIN if you are any one of the following:
- General Partnership, Association, or Joint Venture
- LP, LLC, LLP, LLLP, C or S corp
- Government agency
- Estate/Trust
- Non-Profit Organization
Trade Name or Doing Business As (DBA)
If you are a for-profit business in Colorada not using the entity’s true name or an individual not using your legal first and last name, you may be required to file a Trade Name with the Colorado Secretary of State.
Proof Of Identification
You would need to attach a valid proof of ID with your application for a Colorado State Sales Tax License. The following documents qualify as valid proof of ID:
- United States passport
- Colorado’s driver’s license or out-of-state driver’s license
- Military ID Card
- Resident Alien Card or
- United States Naturalization papers
2. Apply Online or Use Sales Tax/Wage Withholding Account Application CR0100
If you are a business planning to make retail or wholesale sales in Colorado, you must obtain a Colorado sales tax license. Once you have the above-mentioned things ready, you can apply online using the https://mybiz.colorado.gov/ tool or via CR 0100, a sales tax and wage withholding application form. There are six sections in the application form that must be filled out carefully.
These include:
a. Section A – Reason For Application
You need to select the reason for filing this application in this section. The reason for filing could be:
- Original application for a new business
- Adding a new physical location to an existing account
- Changing managing partners, members, or the officers of an existing business
- Changing ownership for an existing business
b. Section B – Business Information
This section will ask for your business information which includes:
- Your first and last name
- SSN, TIN, or ITIN
- Business name, trade name, FEIN
- Choosing a proof of identification
- Principal place of business details like address, city, state, zip code, county, email address
- Mailing address details if different from the principal place of business
- Owners/partners/members/officers details
- Business acquisition or purchase details
c. Section C – Sales Tax Account
This section will ask you to fill in the details related to the sales you’ll be undertaking in the state of Colorado. These include:
- Type of sale – wholesale, retail, or charitable
- License start date or first day of sale
- CO account number
- Sales tax filing frequency
- Completing the sales tax-related questionnaire
- Indicating NAICS code
d. Section D – Withholding Account
If you are an employer withholding tax from your employee wages, this section will require you to fill in the following details:
- Type of withholding
- Filing frequency
e. Section E – Fees for Licenses
In this section, you will have to specify the type of sales tax license and the fee for availing of this license. You can see the below section to know the fees for various types of sales tax licenses and the applicable fees.
f. Section F – Declaration
This section requires you to provide a declaration that the information provided in the application is correct by putting in your signatures.
3. Submit/Mail/Email the Application or Bring the Application to a Tax Service Center
In the case of an online application, you simply need to fill in the details using the MyBizColodardo tool and click ‘Submit’ to complete the application process.
However, you can also download the CR0100 application form from the Colorado Department of Revenue, fill in the necessary details, sign the application, and send the application via email at dor_taxapplications@state.co.us.
You may mail the completed CR0100 application along with a valid ID proof and check or money order for the applicable fees at the following address. The application will take 4 to 6 weeks for processing.
Colorado Department of Revenue
Taxpayer Service Center
PO Box 17087
Denver, CO 80217-0087
Finally, you may even visit the nearest tax service centers with the completed application form, a valid picture ID, and a check or money for the applicable fees for submitting the application. You will receive your sales tax license during the visit.
The addresses of the listed tax service centers are as follows:
Denver Metro
1881 Pierce St – Entrance B
Lakewood CO 80214
Colorado Springs
2447 N Union Blvd
Colorado Springs CO 80909
Pueblo
827 W 4th St Suite A
Pueblo CO 81003
Fort Collins
3030 S College Ave
Fort Collins CO 80525
Grand Junction
222 S 6th St – 2nd Floor
Grand Junction CO 81501
How Much Does It Cost To Get A Colorado Sales Tax License?
The following table showcases fees for various types of sales tax licenses in Colorado:
| Wholesale and Retail Sales Tax License
If the first day of sales or license start date is:
|
$16 $12 $8 $4 |
| Charitable License | $8 |
Please note that a deposit of $50 is also required in the case of a retail sales tax license in Colorado. This deposit is refunded automatically, once your business collects and remits $50 in the state sales tax. Also, do not deduct this sales rax amount from your sales tax return. Finally, this deposit is only required at the first business location.
How Long Does It Take To Get a Colorado Sales Tax License?
If you apply for a Colorado sales tax license via the MyBizColorado tool, you will receive your Colorado Account Number the same day. The license will be mailed to you once the license fee has been posted to your account. You will, however, receive your paper license in 2 to 3 weeks.
If you visit the nearest tax service center, you will receive the sales tax license during your visit to the center.
However, if you mail your completed application to the Colorado Department of Revenue’s address, you will receive your sales tax license in 4 to 6 weeks.
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