Colorado Enacts Small Business Exemption for Retail Delivery Fee

On May 4, 2023, Colorado Governor Jared Polis signed legislation that creates an exemption from the state’s 27-cent Retail Delivery Fee (RDF) for businesses with retail sales of $500,000 or less in the prior calendar year. The legislation also allows sellers to pay the RDF on behalf of purchasers. Additionally, the legislation requires the Department of Revenue (DOR) to waive processing costs if the processing costs exceed the amount of RDF that the retailer is remitting and the payment is remitted via ACH Debit.

Per the legislation, the small retailer exemption applies retroactively to July 1, 2022, when the RDF was first enacted. The legislation also states that there are no refunds of any RDFs for retail deliveries made on or after July 1, 2022 but before July 1, 2023 on the basis of the small retailer exemption.

Per the legislation, a “Qualified Business” for purposes of the exemption means a retailer that in the previous calendar year made retail sales of tangible personal property, commodities, or services in Colorado totaling $500,000 or less. If the retailer had no retail sales in Colorado in the previous calendar year, the retailer is deemed to be a “Qualified Business” for the current calendar year, until the first day of the month after the ninetieth day after the retailer has made retail sales of tangible personal property, commodities, or services in Colorado that total more that $500,000.

As stated above, a retailer can elect to pay the RDF for a retail delivery on behalf of a purchaser. If a retailer elects to pay the RDF, then:

• • • The retailer may not add the RDF to the price or charge for the retail delivery showing the total of the fees as one item called “Retail Delivery Fees” separate and distinct from the price and any other taxes or fees.
    • The purchaser is neither liable nor responsible for payment of the RDF.

Businesses making retail sales in Colorado will want to check if they qualify for the new exemption immediately so they can take appropriate action if applicable. The legislation passed with broad support following hearings in which retailers told lawmakers of the administrative burdens of collecting and remitting the RDF.

For our previous news item on the Colorado RDF, visit Colorado Imposes New Retail Delivery Fee.

(S.B 23-143, Laws 2023; Fiscal Note (SB 23-143), February 16, 2023, Legislative Council Staff)