The Colorado General Assembly has enacted House Bill 21-1162, which impacts in-state retailers, including retail food establishments, who provide single use bags to customers at the point of sale. This bill is attempting to significantly reduce the use of single use plastics due to the harm they can have on the environment. From January 1, 2023 – January 1, 2024, stores may provide a recycled paper or one time use plastic carryout bag for a fee; however, beginning January 1,2024, only recycled paper bags may be provided for a fee. On January 1,2024, in addition to the requirement only recycled paper bags be used, retail food establishments will also be required to stop using polystyrene (commonly known as Styrofoam™) or other similarly constituted containers both for dine in and carryout meals.
Under this law, a “retail store” is defined as a grocery store, supermarket, convenience store, liquor store, pharmacy, drug store, clothing store, or other type of retail establishment which provides carryout bags to customers. This definition can include a farmers or roadside market, festival, or temporary vendor event. However, excluded from this definition are small stores or restaurants located exclusively in Colorado with 3 or fewer locations. These ‘small stores’ must also not be a part of a franchise, partnership, or corporation with any physical locations outside of Colorado. Retail food establishments, including restaurants, are also subject to the bag fees and restrictions.
The fee, which should be collected as of January 1,2023, was established by the General Assembly at ten cents per bag, though counties and municipalities do have the option to adopt higher fees. This fee is also charged to all customers who receive a single use bag, including those who may normally be tax exempt, including governments and 401(c)(3) establishments. The fee is not collected or administered by the Colorado Department of Revenue; it is instead the responsibility of the finance department, finance division, or equivalent agency of the municipality or county where the store is located (or where fees are collected). This will likely make this a cumbersome fee to implement for retailers and retail food establishments as they will have to refer to each locality for rates, collection, remittance, and reporting. For stores with multiple locations, there will not be a centralized process or location to remit, instead they will have to remit to each county/city. As a result of this local responsibility for collecting tax, the payments cannot be made through the Colorado Sale and Use Tax System (SUTS). The bill requires a quarterly basis for so, beginning April 1, 2024, stores will remit 60% of the bag fee to the locality it is collected in, unless the total fees collected are less than twenty dollars, in which case the fees can be remitted with the next quarterly remittance. The remaining 40% of fee will not be calculated as revenue for sales tax purposes at the state level, but local municipalities may subject these fees to sales tax.
The law does allow for some exceptions. First, any polystyrene food container inventory may be used until it is gone, and any inventory of single use plastic bags purchased before the deadlines can be used – with the ten-cent fee—until June 1,2024. Additionally, any individual who can prove participation in a state or federal food assistance program will not be charged the fee. Nor will the fee be charged on packaging of pharmaceutical drugs, medical devices, or dietary supplements. Bags used in the store to package bulk items, produce, meat, fish, dry cleaning/ laundry, and similarly used bags are also excused from the fee. Retail food establishments may also continue to use single use plastic bags if they are not grocery or convenience stores, and they prepare or serve food in individual potations for immediate consumption inside or outside the establishment.
When providing bags, a retailer must follow the below rules to be compliant with this new law:
Penalties on stores may be levied by local governments who do not follow this law. On a second violation of the law, a fine can be assessed at up to five hundred dollars, and the fine can jump to one thousand dollars for the third and any subsequent violations. Each retail transaction with a violation can be counted only as a single transaction, even if multiple bags are given in a single transaction.
Retailers in Colorado will have to carefully consider whether these rules will apply to them and their products and should already be collecting fees and be planning for the complete single use bag ban in 2024. For those companies who only appear at festivals or temporary venues, it would be worthwhile to research the individual city’s requirements regarding if any exception to the law will apply. Especially with the home-rule cities being able to subject the fees to sales tax, the way each locality will handle this should be researched for any Colorado retail establishment.
(Colorado House Bill 21-1162, signed by Governor Jared S Polis July 6,2021, and Colorado Department of Revenue “About the Carryout Bag Fee”)