EYE ON Colorado Sales Taxes

Colorado has the lowest state sales tax rate in the country at 2.9% (except for the 5 states that don’t impose any sales tax). But don’t get too excited since there are a number of local jurisdictions within Colorado that impose sales taxes – taking the average total sales tax rate to about 7.5%.

Like most states, Colorado imposes a sales tax on the sale of tangible personal property – and some enumerated services. Like Arizona, some local jurisdictions in Colorado administer their own sales tax (i.e. Denver) while other local jurisdictions are administered by the state.

Vendors selling to Colorado customers from points outside the state of Colorado (rather than from a fixed location within the state of Colorado) are required to establish a branch code for each customer address. Let me say that another way – if you sell to 100 customers in Colorado, you will need a separate location number and be required to file a separate return for each customer location – YES, that means 100 returns per filing period. If you have a monthly filing frequency, that’s 1,200 returns per year. You can petition the state to approve and accept a spreadsheet in lieu of the returns - so it’s not a death sentence.

Sales tax nexus can be challenging in Colorado as certain local jurisdictions have their own sales tax nexus standards separate from the state. So it’s conceivable that a retailer would need to collect the state sales tax but not the local sales tax if they don’t have sales tax nexus in the local jurisdiction.

Now for the real reason you decided to read about Colorado sales taxes – Marijuana.

Retail marijuana is tangible personal property and subject to sales tax. In addition to the 2.9% state sales tax and any sales tax imposed by local governments, a 10% state retail marijuana sales tax is imposed on sales of marijuana and retail marijuana products. The legislature may increase the retail marijuana sales tax rate up to 15%, and any such increase may be established without the need for voter approval.

The retail marijuana sales tax is imposed on the full purchase price of all retail marijuana. Retail marijuana products, products that contain retail marijuana or any derivative thereof. “Retail marijuana” means all parts of the plant of the genus cannabis whether growing or not, the seeds thereof, the resin extracted from any part of the plant, and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or its resin, including marijuana concentrate, and does not include industrial hemp, nor does it include fiber produced from the stalks, oil, cake made from the seeds of the plant, sterilized seed of the plant that is incapable of germination, or the weight of any other ingredient combined with marijuana to prepare topical or oral administrations, food, drink, or other product. [Colo. Rev. Stat. §39-28.8-101(7); Colo. Code Regs. §39-28.8-101(10) .] “Retail marijuana products” means concentrated retail marijuana products and retail marijuana products that are comprised of retail marijuana and other ingredients and are intended for use or consumption, such as, but not limited to, edible products, ointments, and tinctures. [Colo. Rev. Stat. §39-28.8-101(9).] The sale of any product that contains any amount of retail marijuana or any derivative thereof is subject to the retail marijuana sales tax on the full purchase price of such product. [Colo. Code Regs. §39-28.8-202.]

This puts a different spin on the question which state has the highest sales tax rate.

Stay tuned for more of Jeff's EYE ON series as he blogs about sales and use tax State by State.