Colorado State Tax Updates

Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Colorado.

November 4, 2024

Authored by: Emilia Jarrin and Katie Nguyen, CPA

Denver voters will be presented with two ballot proposals increasing local sales taxes:

Presently, the Denver sales tax rate is 8.81%. If both ballot initiatives pass, the Denver sales tax rate will increase to 9.65%. This would make the Denver sales tax rate one of the highest in the nation.

If you have questions about local sales taxes, please reach out to a member of the Withum SALT Team.

June 7, 2024

Authored by: Katie Nguyen, CPA and Kiana McGowan, CPA, MBA

On May 14, 2024, Colorado Governor Jared Polis signed SB24-228, temporarily reducing the 2024 individual and corporate income tax rates. This legislation is a noteworthy amendment to Colorado’s preexisting law under the Taxpayer’s Bill of Rights (TABOR). According to TABOR, refunds of excess state revenues are due to taxpayers if certain conditions are met. With the introduction of SB24-228, the mechanism for providing these refunds has been expanded to include a reduction in the state’s income tax rate.

For the tax year 2024, the income tax rate will see a reduction from 4.4% to 4.25%. This change applies to both individual and corporate income taxpayers. Additionally, SB24-228 includes provisions for potential tax reductions in future years.

Please find a copy of SB24-228 here for more detailed information on Colorado’s income tax changes.

If you have questions about state income tax rates, please reach out to a member of the Withum SALT Team.

April 19, 2024

Authored by: Bonnie Susmano, JD, MBA and Ryan Schupp

Colorado HB24-1041 amends Colo. Rev. Stat. § 39-26-109 to make tax compliance easier for taxpayers. As per HB24-1041, taxpayers with monthly sales tax collections of less than $300 will now file returns on a quarterly rather than monthly schedule. For tax years commencing on or after January 1, 2025, the quarterly filing threshold is increased to $600. For tax years starting after January 1, 2025, the director has the discretion to further increase the quarterly filing threshold amount. Additionally, the bill prohibits the home rule cities, towns, and counties from collecting their sales and use taxes from remote sellers if they do not use the electronic sales and use the tax simplification system overseen by the Department.

If you have questions about state and local sales and use tax compliance, please reach out to a member of the Withum SALT Team.

July 7, 2023

Authored by: Brandon Spinella and Bonnie Susmano, JD, MBA

The Colorado Department of Revenue published its annual DR 1002 documenting new sales and use tax rate changes which will become effective July 1, 2023. Effective July 1, 2023, there are rate changes taking effect in four local jurisdictions. There are no statewide sales/use tax changes taking effect at this time.

For additional detail on the various state and local tax changes, please refer to Colorado’s DR 1002.

If you have questions on how Colorado’s Sales and Use Tax rates affect your business, please reach out to a member of the Withum SALT Team.

June 16, 2023

Authored by:Katie Szymanski, CPA and Brandon Mejia

On June 7, 2023, Governor Jared Polis signed L.2023 H1112, which increases the earned income tax credit eligible to be received within the state, as well as establishing new federal adjusted gross income thresholds.

The governor also enacted L.2023 H1189, which creates a new nonrefundable income tax credit for taxpaying employers who contribute to an employee’s down payment and/or closing costs on the purchase of a primary residence.

If you have questions about state tax credits and incentives, please reach out to a member of the Withum SALT Team.

February 17, 2023

Authored by: Katerine Velasquez and Bonnie Susmano, JD, MBA

On February 14, 2023, the Colorado Department of Revenue adopted regulations on retail delivery fees. The new regulations include the following provisions:

If you have questions about whether your business is subject to Colorado’s delivery fee requirements, please contact a member of the Withum SALT Team.

November 11, 2022

Authored by: Jonathan Weinberg, JD, LLM, Principal

By a greater than 10% margin, Colorado voters passed Proposition FF which limits the standard and itemized deductions for individuals making more than $300,000. Effective January 1, 2023, single filers are limited to $12,000 and joint filers are limited to $16,000 of deductions. The current standard deduction in Colorado is $12,950 for singles and $25,950 for joint filers. As such, all individuals with incomes over $300,000 will be subject to deduction limitations. Proposition FF was passed by voters 55.3% to 44.7% and it is anticipated that this provision will increase state revenues by over $100M.Colorado’s prior deduction limit only applied to itemized deductions in excess of $30,000 if single and $60,000 if filing joint, and only applied to taxpayers with incomes in excess of $400,000.

August 29, 2022

Authored by: Breea Boylan, MSA

The Colorado Department of Revenue has announced that House Bill 22-1055, effective August 10, 2022, creates a state sales tax exemption commencing January 1, 2023, for all sales, storage, use, and consumption of incontinence products and diapers (absorbent cloth or disposable products worn by humans who are incapable, or have difficulty, controlling their bladder or bowel movements) and period products (consumer products used to manage menstruation). Local statutory taxing jurisdictions may choose to adopt either or both exemptions by express inclusion in their sales and use tax ordinance or resolution. However, self-collecting home-rule municipalities are not obligated to adopt this exemption, meaning such products may remain taxable in specific Colorado home-rule jurisdictions.

June 10, 2022

Colorado enacted a retail delivery fee on all deliveries made by motor vehicle to a Colorado consumer with at least one item of tangible personal property subject to state sales or use tax. This fee will also include deliveries by a third party. The new retail delivery fee will take effect on July 1, 2022, and the delivery fee will be due by the 20th of every month, like the sales tax return. If a retailer files Colorado sales tax returns quarterly or annually, the retail delivery fee return will follow the same schedule.

Taxpayers can file the $0.27 retail delivery fee, as calculated per sale, on Form DR 1786. The fee types and rates for July 1, 2022, through June 30, 2023, are as follows:

In-state and out-of-state retailers will be registered automatically for the fee if the retailer has an active sales tax account, a retailer license, and any sales tax liability reported after January 1, 2021. Taxpayers must print “retail delivery fees” on the invoice as a separate line item to customers.

June 3, 2022

Colorado Governor Polis signed Senate Bill 124 (S.B. 124) on May 16, 2022, which reflects changes to Colorado’s enacted elective pass-through entity tax (PTE), often referred to as a SALT Workaround. These changes allow for a retroactive PTE election back to tax years beginning on or after January 1, 2018 (i.e., tax years where the statute of limitations is generally open).

September 16, 2021

The Colorado Department of Revenue has determined through a letter ruling that learning plans available through an online learning platform are subject to sales and use tax. The ruling states that users gain access to streaming video lessons, which teach academic subjects, professional topics, vocational licensure preparation courses, a written transcript of the audio of the video, and online “tutors.” In classifying mixed transactions of tangible personal property and services, the department looks to the true object test. It was determined that the overall learning plan is viewed as tangible personal property even though the plans also provide services, as the services are in existence to support the online use of the platform. The delivery method of the sale does not impact the taxability of the sale of tangible personal property.

July 2, 2021

Colorado legislators recently modified the definition of tangible personal property, expanded the number of specifically enumerated services that are subject to sales tax, and now denies a merchant credit to certain vendors.

Pursuant to HR21-312, digital goods are now included in State’s definition of tangible personal property. Digital goods are defined as any item of tangible property that is delivered or stored by digital means such as video, music, or electronic books. Pursuant to the legislation, the delivery method (e.g., compact disc, electronic download, internet streaming) no longer affects the transaction’s taxability, and as such digital transactions now have parity with physical transactions.

The same bill also expands the list of enumerated taxable services to include mainframe computer access, photocopying, packaging, and crating. Taxpayers providing such services will now be obligated to charge their customers sales tax unless they are provided with a valid, applicable exemption certificate. Finally, effective January 1, 2022, vendors with taxable sales greater than $1M are no longer able to retain the 4% vendor fee to cover the retailer’s expense in collecting and remitting Colorado sales tax.

June 25, 2021

The Colorado Department of Revenue has announced an extension of the Colorado based small business exception to sales tax destination sourcing. The exception would have been repealed on June 30, 2021, but will now be extended to February 1, 2022. The exception allows Colorado based small businesses with less than $100,000 in annual retail sales to source their sales to their business’ location rather than where the purchaser receives the tangible personal property or service. For more information, please visit the Colorado Department of Revenue website.

March 23, 2021

The Connecticut Department of Revenue Services (DRS) has issued further guidance on the extension of the due date for 2020 individual income tax returns and payments to May 17, 2021. The extension until May 17th only applies to Forms CT-1040; CT-1040NR/PY; and CT-1040EXT. DRS has not extended the filing and payment deadlines for individual income tax estimated payments. DRS has also not extended the filing and payment deadlines for Form CT-1041 (Income Tax Return for Trusts and Estates) and Form CT-1041 estimated payments. Individual taxpayers who need additional time to file beyond the May 17th deadline may request an extension until October 15th, 2021, by filing Form CT-1040EXT through the DRS online Taxpayer Service Center (click on TSC-INDIVIDUAL LOGIN button, then ‘File An Extension’ in blue box). Taxpayers requesting additional time to file should estimate their tax liability and pay any taxes owed by the May 17th deadline to avoid additional interest and penalties. (2021 CT Income Tax Filing Season: FAQ, updated 03/21/2021.)

November 16, 2020

On November 13, 2020, the Colorado Department of Revenue and the Governor’s Office of Information Technology rolled out Colorado’s first Sales and Use Tax System (SUTS) online portal for business that collect retail sales tax in excess of $100,000 in a year. The new portal will allow Colorado businesses to file taxes for the 600 plus jurisdictions in Colorado in one convenient location online. Businesses and individuals will be able to use took within the portal to find tax rate for any jurisdiction simply by entering an address free of charge. The state portal includes a new Application Program Interface in which businesses can integrate the tax lookup tool with their existing software. Other features of the new portal include taxability and exemption matrixes, the ability to calculate tax rates on items with differing tax rates in the same jurisdiction, and the history record of any tax rate changes.

With 272 municipalities, Colorado has been a complicated state to navigate when it comes to sales tax. Especially considering 71 municipals are home rule jurisdictions that can establish their own tax base and require taxpayers file and remit tax directly to the municipality as a self-collecting tax jurisdiction. More than half of the home rule jurisdictions are on the SUTS System and many others have started the process of executing agreements. A complete list of the jurisdictions joining the system can be found here.

April 13, 2020

The income tax payment and the estimated income tax payment deadlines have been extended 90 days until July 15, 2020. All income tax returns that were required to be filed by April 15, 2020 were given a six month extension, and are due on or before October 15, 2020.
Source: https://www.colorado.gov/pacific/tax/income-tax-deadlines

April 1, 2020

The income tax payment deadline for all Colorado taxpayers has been extended to July 15, 2020. Income tax returns previously due to be filed April 15, 2020 have been given an automatic six-month extension, now due October 15, 2020. The estimated payment deadline and penalties for the same have been waived until July 15, 2020.

More on Taxes and the Coronavirus Pandemic.

Disclaimer: Please note this is the information that is readily available at this time, it is subject to change so please consult your Withum tax advisor.