Effective January 1, 2026, Colorado has enacted legislation that eliminates the state sales tax vendor fee (also referred to as a service fee). As of that date, a retailer is not permitted to retain any money to cover their expenses related to collecting and remitting Colorado state sales tax.
Prior to January 1, 2026, retailers with total taxable sales of $1 million or less for a filing period are allowed to retain 4% of the tax reported as a vendor fee, up to $1000 per filing period.
Per the legislation, the vendor fee is being removed to promote fairness and equality for all retailers by ending a benefit that some retailers receive and others do not receive. The legislation goes on to state that the vendor fee is being eliminated to simplify the collection of state sales tax, ease administrative burden, and relieve retailer confusion.
Retailers making sales into Colorado will want to make note of this change, effective January 1, 2026. (Ch. 9 (H.B. 1005), Laws 2025, First Extraordinary Session)