Colorado: Sales Tax Handbook
What purchases are taxable in Colorado?
The taxability of various transactions (like services and shipping) can vary from state to state, as do policies on subjects such as whether excise taxes or installation fees included in the purchase price are also subject sales tax. This reference is here to help answer your questions about what is and is not subject to the Colorado sales tax.
Contents1.) Taxability of Goods and Services
- General Colorado taxability guidelines
- Are services subject to sales tax?
- Is shipping & handling subject to sales tax?
- Are drop shipped items taxable?
Section 1: Taxability of Goods and Services
What transactions are generally subject to sales tax in Colorado?
Colorado imposes a sales tax on "all retail sales of tangible personal property", which includes the rental of hotel rooms or accommodations.
Are services subject to sales tax in Colorado?
This means that a freelance accountant would not be required to collect sales tax, while a someone working in the creation of clothing may be required to collect sales tax.
You can find a table describing the taxability of common types of services later on this page.Top
Are shipping & handling subject to sales tax in Colorado?
Colorado law states that generally, shipping and handling charges are not subject to sales tax as long as the following conditions are met:
a.) The shipping and delivery charges are "separable from the purchase", which means the seller allows the buyer to choose between using the seller's shipping service or an alternative (like picking the item up themselves).
b.) The shipping and delivery charges are separately stated from the cost of goods on the customer's invoice
Shipping charges of any kind are also non-taxable if the sale is of a tax exempt item, to a tax exempt buyer, or is otherwise exempt from the Colorado sales tax.
Are drop shipments subject to sales tax in Colorado?
"Drop shipping" refers to the common business practice in which a vendor, often in a different state, makes a sale of a product which is shipped to the end-user by a third party supplier hired by the initial vendor. In Colorado, drop shipments are generally subject to state sales taxes.
Section 2: Taxability of Various Items in Colorado
This table shows the taxability of various goods and services in Colorado. If you are interested in the sales tax on vehicle sales, see the car sales tax page instead. Scroll to view the full table, and click any category for more details.
|Products on Amazon.com||TAXABLE *|
|Food and Meals|
|Grocery Food||EXEMPT *|
|Leases and Rentals|
|Motor Vehicles||TAXABLE *|
|Tangible Media Property||TAXABLE *|
|Manufacturing and Machinery|
|Raw Materials||EXEMPT *|
|Utilities & Fuel||EXEMPT|
|Medical Goods and Services|
|Medical Devices||EXEMPT *|
|Newspapers and Magazines|
|General Occasional Sales||TAXABLE|
|Optional Maintenance Contracts|
|General Optional Maintenance Contracts||EXEMPT *|
|Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts||TAXABLE|
|Pollution Control Equipment|
|General Pollution Control Equipment||TAXABLE *|
|Software and Digital Products|
|Canned Software - Delivered on Tangible Media||TAXABLE|
|Canned Software - Downloaded||EXEMPT|
|Custom Software - Delivered on Tangible Media||EXEMPT|
|Custom Software - Downloaded||EXEMPT|
|Customization of Canned Software||EXEMPT|
|Vending Machine Sales|
* See notes in category taxability page for details
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