CO Sales Tax 101 Shipping States

Is Shipping Taxable in Colorado?

by Mark Faggiano

Colorado Shipping Taxability

Sales tax can be tricky, especially because each state has a unique set of regulations. A frequently asked question is whether or not to charge sales tax on shipping and handling. Let’s see how Colorado handles this issue for businesses.

Is Shipping Taxable in Colorado?

Here is what the Colorado Department of Revenue has to say:

Colorado sales tax on freight

So it appears that in Colorado, generally, shipping and handling is not taxable as long as you meet two criteria:

  1. The shipping and handling charges are separable from the purchase. These shipping and handling charges are considered separable if the person selling allows the buyer to use the seller’s transportation service or an alternative transportation service, which includes the buyer coming to get the goods themselves.
  2. The shipping and handling charges are listed separately on the invoice.

It also reads that there is no sales tax on shipping related to tax exempt sales, including tax exempt items, sales to a tax exempt charity, or shipping out of state because the delivery charges are considered part of the exempt sales.

That said, if your business sells online, chances are you do not meet criteria #1 because the shipping isn’t “separable” from the transaction. For example, if a customer can’t come to your showroom and pick up the item then the act of shipping the item was necessary to the sales and Colorado considers that taxable.

Summary of Sales Tax on Shipping in Colorado

If you sell products online to buyers in Colorado, you can avoid charging sales tax on shipping in Colorado if you do these two things:

  1. List the shipping charges separately on the invoice.
  2. Make sure the shipping and handling charges are separable by allowing the buyer to use the seller’s transportation service or an alternative transportation service, which includes the buyer coming to get the goods themselves.

Handling Colorado Shipping and Handling Sales Tax with TaxJar

The TaxJar app defaults to the most common Colorado scenario – that shipping and handling is non-taxable.

However, if your business does charge sales tax on shipping, then TaxJar’s Shipping & Handling Override allows you to update that in your state tax settings. This will make the Colorado Expected Sales Tax Due Report more accurate.  This will also tell the TaxJar API to charge sales tax on Colorado shipping.

Learn more about how TaxJar treats shipping and handling here.

To learn more about TaxJar and get started, visit TaxJar.com/how-it-works. Need more answers? Start the conversation the comments!

  • Sean

    We manufacture our product in Colorado and want to ship to Indiana and New Mexico. What sales tax do we charge? Our sales tax or theirs?

  • You only need to charge sales tax in states where you have “sales tax nexus.” (Here’s more about it: http://taxjar.wpengine.com/sales-tax-nexus-definition/

    If you have sales tax nexus in Indiana and New Mexico then you would charge sales tax at the rate of your buyer’s location.

  • Ken

    What about for something like FBA where shipping is often times free for the buyer. Is it a case of no charge, no tax?

  • Hi Ken,

    Exactly! You can’t charge sales tax on an amount you don’t charge the buyer!

    • Ken

      Thanks. So with FBA I’m not charging tax since AZ breaks S/H out on invoices. Not many orders to CO anyways.

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