Doing Business In Colorado
A retailer is doing business in Colorado and subject to all sales tax licensing and collection requirements if the retailer maintains any place of business in Colorado directly, indirectly, or by a subsidiary. Such a place of business may include an office, distribution facility, salesroom, warehouse, storage place, or home office of a Colorado resident employee. For more information on how to collect and remit sales tax, visit the Sales & Use Tax web page.
Transition to Destination Sourcing
Sales tax collection for the State of Colorado changed in 2019. At that time, exceptions to destination sourcing were given to small businesses. Destination sourcing means that sales tax is calculated based on the address where the taxable product or service is delivered to the consumer, not on your business location.
Now that the Geographic Information System (GIS) is online and available for everyone to use, state statute requires retailers using the temporary origin sourcing exemption to transition to destination sourcing by 90 days from the date the Department announced that the system was live.
This means that all businesses located within Colorado, regardless of their sales volume, must begin complying with the destination sourcing rules below by July 1, 2021. The Department is not authorized to grant exceptions to this statutory requirement. Visit the Transition to Destination Sourcing web page for more information.
General Destination Sourcing Rules
Sales tax is now calculated based on the buyer's address when the taxable product or service is delivered to the consumer. This is called destination sourcing. Destination sourcing is also used when a product or service has a lease/rental agreement with periodic recurring payments.
Businesses will now be required to collect and remit sales tax for all retail sales to Colorado consumers, regardless of the physical location for the business. In general, a retail sale is made at the location to which it is sourced in accordance with the following rules:
- If the purchaser takes possession of the purchased property or first uses the purchased service at the seller's business location, the sale is sourced to that business location.
- If the property or service is delivered to the purchaser at a location other than seller's business location, the sale is sourced to the location the purchaser receives the purchased property or first uses the purchased service.
- If the purchaser requests delivery of the property or service to another recipient (i.e. the purchase is a gift), the sale is sourced to the location the recipient takes possession of the purchased property or first uses the purchased service.
If a sale cannot be sourced using the preceding rules, section 39-26-104(3)(a), C.R.S., provides additional guidelines for sourcing retail sales based upon the seller's records, the purchaser's payment instrument, or the location from which the property was shipped. These sourcing rules do not apply to leased property. See Department publication Sales & Use Tax Topics: Leases for sourcing rules for lease payments.