Colorado sales tax for businesses

Navigating sales tax in the Centennial State is often compared to a trek through the Rockies. It requires preparation, the right tools, and an understanding of the terrain. Colorado is a “home-rule” state, meaning many cities have the authority to establish their own tax laws and collection systems independently of the state.

For business owners, staying compliant means managing state-level requirements while juggling the diverse rules of over 70 home-rule jurisdictions. This guide provides a strategic roadmap for managing Colorado sales tax with precision.

What is the Colorado sales tax?

The state of Colorado imposes a base sales tax rate of 2.9%. However, very few businesses collect only that amount. Most transactions are subject to additional layers of tax from counties, cities, and special districts like the Regional Transportation District (RTD).

Because of this “layering” effect, combined rates vary significantly across the state. To find the specific sales tax rate for your business address or delivery location, you can use the official Colorado tax rate lookup tool.

Local rate examples

Because of Colorado’s home-rule status, combined rates vary significantly based on the exact address of the sale. See examples of City, County, Special District, and Self-Collected rates on tax.colorado.gov. 

For more details on the sales and use tax, refer to the DR 1002 Publication.  

How to calculate Colorado sales tax?

To calculate the tax on a standard transaction, multiply the item price by the total combined rate for the jurisdiction where the item is sold or delivered.

Total Sales Tax = Purchase Price × Combined Tax Rate

For example, if you sell a piece of furniture or a taxable electronic device for exactly $100.00 in Denver with a combined tax rate of 9.15%, here is how you calculate the tax:

$100.00 X 0.0915 = $9.15

The total amount charged to the customer would be $109.15.

Note on rounding: Colorado law requires you to round the tax to the nearest cent. If your calculation results in a fraction of a cent (e.g., 0.005 or higher), you round up to the next penny.

Use our “reverse” sales tax calculator

In fast-paced environments like bars, food trucks, or festivals, many vendors prefer to use “all-inclusive” pricing (e.g., selling a drink for a flat $10.00). To determine how much of that $10.00 is your revenue and how much is tax, you can use our reverse sales tax calculator.

What is subject to sales tax in Colorado?

In Colorado, sales tax generally applies to all sales of tangible personal property. That means state law requires most businesses to collect sales tax on the items they sell. Tangible personal property includes:

• Furniture
• Electronics
• Clothing
• Rooms and accommodations (see Sales & Use Tax Topics: Rooms & Accommodations)
• Prepared food and drink (see Sales & Use Tax Topics: Dining Establishments)
• Mainframe computer access
• Photocopying
• Packing and crating
• Gas and electric service for commercial use
• Telephone and telegraph services
• Digital goods, including video, music, or electronic books
• Computer software. For specific circumstances, see Sales & Use Tax Topics: Computer Software.

Does Colorado charge sales tax on marijuana?

Yes, the sales tax rate is 15%. If you sell retail marijuana, also known as recreational marijuana, to the public, you must file the Retail Marijuana Sales Tax Return. Include only retail marijuana and retail marijuana-infused products on the Retail Marijuana Sales Tax Return. A return is required for each retail marijuana store location. 

In addition to the retail marijuana sales tax return, all marijuana businesses must file the Colorado Retail Sales Tax Return (DR 0100). Retail marijuana is exempt from the state sales tax and some Special District taxes. See the DR 1002 Publication for a complete list of local governments that allow exemption Q. 

Does Colorado charge sales tax on services?

Generally, no. Pure services, such as legal advice, hair styling, or consulting, are not subject to state sales tax. However, if a service is necessary to complete the sale of a physical product (like crating or delivery fees for a taxable item), that service charge may also be taxable.

Colorado sales tax on food

Food taxability in Colorado depends on its readiness for consumption:

• Grocery Food: Most essential food items for human consumption at home are exempt from the 2.9% state tax, though they may still be subject to local city or county taxes.
  • This includes:
    • Seeds and plants which produce food for human consumption.
    • Food purchased with food stamps or WIC vouchers.
• Prepared Food: Meals sold in restaurants, cafes, or food trucks are fully taxable at both state and local levels.
• Additional taxable food examples:
  • Alcoholic beverages
  • Cigarettes, tobacco, and tobacco products.
  • Food to be eaten in the store, hot foods ready to eat, and food marketed to be heated in the store.
  • Vitamins, dietary supplements, and medicines.

See Taxable and Tax Exempt Sales of Food and Related Items for more information.

Managing daily tax collections in a high-volume restaurant is a massive administrative burden. DAVO by Avalara solves this by automatically setting aside the exact amount of sales tax you collect every day. When it’s time to file, DAVO handles the paperwork and the payment, ensuring you never fall behind.

What is exempt from sales tax in Colorado?

Certain sales are exempt to avoid “double taxation” or to provide relief on essential goods. Common exemptions include:

• Items for Resale: Goods purchased by a retailer to be sold to the end consumer.
• Charitable Organizations: Sales made directly to registered 501(c)(3) nonprofits.
• New Essentials: Colorado exempts diapers and period products from state sales tax, categorizing them as essential hygiene products. 

Other specific exemptions include:

• Food for human consumption at home or sold through vending machines
• Gas, electricity, etc., for residential use materials per the business list on Public Health & Environment
• Renewable energy components
• School-related sales
• Sales on retail and retail marijuana products*
• Diapers and incontinence products
• Menstrual products
• Residential energy storage systems

While retailers don’t collect tax on exempt sales, they must maintain appropriate records and report exempt sales on the applicable lines of the Colorado Retail Sales Tax Return (DR 0100) and associated Schedule A and Schedule B.

* See DR 1002 for a list of Special District governments that allow exemption Q = retail marijuana products. See also How To Claim the Retail Marijuana Exemption on Your Sales Tax Return.

How to manage tax-exempt sales in Colorado?

To sell an item tax-free, you must collect a Declaration of Wholesale or Entity Sales Tax Exemption (DR 5002) from the buyer. Businesses, charitable organizations, and government agencies use the DR 5002 to declare their status to a seller. You are required to keep these certificates on file to justify the untaxed sale during a state audit. 

How to document exempt sales

To sell an item tax-free, you must now collect Form DR 5002 from the buyer.

1. Verify the License: Use Revenue Online to ensure the buyer’s sales tax license is active.
2. Keep the Form: Do not send the DR 5002 to the state; keep it in your records for at least three years in case of an audit.

Colorado sales tax holiday

Unlike many other states, Colorado does not typically offer a recurring annual statewide sales tax holiday for back-to-school or energy-efficient appliances. While local home-rule cities may occasionally enact their own temporary holidays, businesses should assume the standard rates apply unless notified otherwise by their specific municipality.

How to register for a Colorado sales tax license?

Before opening your doors, you must obtain a license through the Colorado Department of Revenue.

• How to apply:
  • Online via MyBizColorado, the official filing tool for the State of Colorado.
  • In person: Bring the completed CR 0100 application, a valid picture ID, and a check or money order for the license fee(s) to a service center location.
    • For service center locations and hours of operation, visit the DOR taxation division website, or call 303-238-SERV (7378).
  • By mail: Complete the form and make a copy for your records before mailing the original application along with a valid picture ID and a check or money order for the applicable license fees to the following address:
    • Colorado Department of Revenue, Taxpayer Service Center, PO Box 17087, Denver, CO 80217-0087
    • Allow 4 to 6 weeks for processing.
• Sales tax license cost is prorated depending on your first day of sales or the license start date, and ranges from $4 to $16.00 for a two-year period.
  • Colorado requires a $50.00 deposit on a retail sales tax license. The deposit is refunded automatically after a business collects and remits $50 in state sales taxes.
  • Charitable organization license fee is $8, and is exempt from the $50 deposit.
• Timeline: It generally takes two to three weeks to receive your physical license.

Information you will need:

• Reason for filing the application
• Type of organization legal structure
• For Individuals/Sole Proprietors: Tax Identification Number (TIN)
• For any type of organization other than Individual/Sole Proprietor: Business Name, Trade Name/Doing Business As (DBA), and Federal Employer Identification Number
• Valid proof of identification
• Principal address
• County
• Phone number
• Email address
• Business name and attention to
• Mailing address
• Owners/Partners/Members/Officers
• Prior business name and owner’s name, if applicable
• Type of sales: wholesalers, retail sales, and charitable
• License start date or first day of sale
• Filing frequency
• Specific products you sell and/or services you provide

How to file Colorado sales tax?

If you are in the business of selling, renting, or leasing tangible personal property, you must file sales tax returns.

Forms, filing instructions, and electronic filing options are available online at Tax.Colorado.gov.

Colorado has streamlined the filing process for businesses through the Sales and Use Tax System (SUTS).

Because Colorado has so many home-rule cities that collect their own taxes, filing used to require multiple separate returns. The SUTS portal allows businesses to file state and local taxes for participating home-rule jurisdictions in one single location. This makes it easier for businesses that ship products to various cities across the state.

How to pay Colorado sales tax?

Businesses may make electronic payments through Revenue Online, the SUTS portal, or other means listed below. Log in to Revenue Online and select “Make a Payment” under “Payment Options.” 

Colorado DOR Revenue Online direct debit

Use this option to make a single payment or schedule future payments. There are no service fees. Your payment is effective on the date initiated, or a future date if scheduled. Funds will transfer in three to five business days. When using a bank account for the first time, it may take up to eight business days.

Debit or credit card

Use this option to make a debit or credit card transaction through Colorado’s third-party vendor.

An additional service fee of $0.75 plus 2.25% of the payment amount applies. The payment is effective on the date initiated. Funds will transfer in 3-5 business days.

E-check

Use this option to make an E-Check transaction through Colorado’s third-party vendor.

A $1 service fee applies. Payment is effective on the date initiated. Funds will transfer in three to five business days.

Cryptocurrency

Use this option to make cryptocurrency payments through the PayPal Cryptocurrencies Hub. An additional service fee of $1.00 plus 1.83% of the payment amount applies. Additional PayPal fees may apply. Payment is effective on the date initiated. USDs will transfer in three to five business days.

Automated Clearing House (ACH) Credit

This option allows you to make an electronic payment from your bank account directly to the Department of Revenue. CDOR does not charge a fee for this service, but your bank may charge you a fee.

Information you will need:

• Your Social Security Number (SSN), Federal Employer Identification Number (FEIN), or Colorado Account Number (CAN).
• Tax type code: See page 2 of form DR 5785
• Tax period ending date
• Payment amount
• Bank Name: Wells Fargo, Denver CO 80202
• Account Name: Treasurer, State of Colorado, DOR, EFT Deposits
• Routing and Transit Number: 121000248
• Account Number (Checking): 19451234567891945

Contact your financial institution if you have questions.

Check or money order

Before mailing your payment, the State encourages an electronic method. Filing electronically reduces errors and processing time. Applicable penalties and interest will continue to accrue while your mailed payment is in transit and being processed. Visit the Tax Payment Options page to verify if you can pay your tax bill with a check or money order.

Things to remember:

• Make your check, money order, or cashier’s check payable to the Colorado Department of Revenue. 
• Note your last name, social security number (SSN) or Colorado Account Number (CAN), and tax period in the check memo area. 
• Include the tax bill/payment voucher with the payment. 
• Keep a copy of the check or money order for your records and tracking purposes. 

Mail your payment to the address specified on the tax bill. Mailed payments are effective on the postmark date. It can take up to 10 business days to receive and process a mailed check or money order.

Cash

Cash payments are only accepted on some tax types. Visit the Tax Payment Options Page to verify you can pay your tax bill in cash. There are no additional service fees for cash payments.

Do not send cash through the mail. Bring the tax bill/payment voucher to the Cashier’s office at 1881 Pierce Street, Lakewood, inside the DMV, Entrance A. Other Department of Revenue Taxpayer Service Center Locations are not able to accept cash.

Appointments are not required to visit the CDOR Cashier’s Office, but are highly encouraged, especially for marijuana businesses making cash payments. For expedited cash payment assistance, you may make an appointment.

Payment is effective on the date paid. The payment will be posted to your account within two business days.

Payment plan

Monthly payment plans are available in specific tax situations. You can request a payment plan through Revenue Online (login required) or by calling the Collections Section at 303-205-8291. Once approved, you must make a monthly payment using one of the payment types listed above. 

Payments are due the same day each month. The first payment is usually due 30 days after your request is approved. Standard late payment penalty fee(s) will still apply, and interest will accrue during the life of the plan.

How DAVO can help with paying Colorado sales tax

Did you know DAVO can track, save, and remember to pay your sales tax for you? Just connect DAVO to your Point of Sale (POS) system. Each day, DAVO will transfer the exact amount of sales tax collected to a secure tax holding account. When your Colorado sales tax return is due, DAVO automatically files and pays the exact amount owed to the Colorado Department of Revenue.

Colorado sales tax filing frequency and due dates

Colorado determines filing frequency by the amount of sales tax collected monthly.

If the 20th day falls on a weekend or holiday, the due date is the next business day.

You must file a sales tax return every filing period, even if you haven’t collected any sales tax. If you don’t file, the Department will estimate the billing amount and file a return on your behalf. These estimated returns will be due until an actual return is filed. For more information, see How to Zero File a Sales Tax Return.

Vendor fee shifts

Under House Bill 25B-1005, the state sales tax vendor fee was eliminated effective January 1, 2026. Businesses are no longer able to retain that 3.33% discount and must remit 100% of state sales tax collected. 

The elimination of the state service fee does not impact local sales tax vendor fees. Many local jurisdictions and special districts still allow retailers to retain a service fee for collecting and remitting local sales tax. Find rate information in the DR 1002 publication. 

For more details on the current rules and required forms, visit the Colorado Department of Revenue’s Service Fee information page. 

NOTE: If you do business in other states, you may be eligible for sales tax discounts (also known as vendor compensation or allowance) in those states. Imagine getting back some of the costs associated with tax compliance just for timely sales tax filing and payment. Learn more about state-by-state sales tax discount opportunities.

What is the Colorado sales tax late payment penalty?

Missing a filing deadline in Colorado is an expensive mistake. If you fail to file or pay on time, you are subject to:

• Penalty: The greater of $15.00 or 10% of the tax due, plus 0.5% for each additional month the payment is late.
• Loss of Discount: You immediately forfeit your right to any local vendor fee/collection allowance for that period.
• Interest: Late payments accrue interest at a rate set annually by the Department of Revenue (currently 12% annually for 2025).

How DAVO can help with Colorado sales tax

From running a storefront in the heart of Denver to managing multiple locations across the Front Range, Colorado business owners already have plenty on their plates. Juggling various local tax rates and the nuances of home-rule compliance can feel overwhelming, especially with the state-level vendor fee set to expire in 2026. 

DAVO helps take that stress off your plate by automatically setting aside the sales tax you collect each day, then filing and paying it on your behalf when it’s due, on time, every time, guaranteed. By ensuring your filings are always punctual, DAVO helps you capture available local collection allowances and avoid the steep penalties associated with late Colorado filings. You can stop worrying about missing a return, paying late, or chasing paperwork. Whether you have one or multiple locations, DAVO keeps you compliant with less stress.

Choose your POS system to get started with DAVO.

Colorado Department of Revenue, Taxation Division:

https://tax.colorado.gov

Contact information: https://tax.colorado.gov/contact-us

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