Colorado Sales Tax Changes for DTC

Please read through final paragraph below:

As a result of the Wayfair decision, Colorado will require out-of-state retailers that have “substantial nexus” with the state of Colorado to apply to the Colorado Department of Revenue (DOR) for a Sales Tax License by Nov. 1, 2018 and begin collecting Colorado sales tax on sales shipped to consumers in Colorado beginning Dec. 1, 2018.

A winery is considered an out-of-state retailer with substantial nexus in Colorado if, in either the previous or current calendar year the retailer has:

  1. A physical presence in Colorado;
  2. $100,000 or more of gross sales or services delivered in Colorado, including exempt sales; or
  3. 200 or more transactions selling tangible personal property or services delivered in Colorado.

The new sales tax policy will also affect some wineries already collecting Colorado sales and use tax to avoid having to comply with the reporting requirements relating to remote seller transactions that went into effect on July 1, 2017. Instructions on the DOR’s website state that out-of-state retailers, including wineries, already registered with the DOR will be required to close their existing Retailer’s Use Tax account and obtain a new Sales Tax License if they meet or fall above the thresholds of $100,000 in gross sales or services, including exempt sales, or 200 annual transactions into Colorado. Wineries that fall below the thresholds for having substantial nexus may elect to keep their existing Retailer’s Use tax account.

A Sales Tax license requires a $50 deposit that will be refunded automatically after the business collects and remits $50 in state sales taxes, a $16 fee and renewal at the beginning of every even numbered year.

Wineries may find more information and instructions for closing a Retailer’s Use Tax account and adding a Sales Tax license on the DOR’s website.

It is important to note: holding a sales tax license may create a responsibility to pay local sales taxes. Colorado is one of only three states that allows local jurisdictions to administer their own sales taxes, meaning the city or county collects their own sales tax. The DOR has yet to clarify extent to which the new emergency regulations apply to home rule jurisdictions. For this reason, Wine Institute recommends that wineries consult their tax attorney prior to taking any action.