Colorado retail delivery fee complicates winery DTC compliance

Update June 26, 2024: The Colorado retail delivery fee is set to increase over time: 27 cents July 1, 2022–June 30, 2023; 28 cents July 1, 2023–June 30, 2024; and 29 cents July 1, 2024–June 30, 2025. It will likely increase again on July 1, 2025.

Starting July 1, 2022, sales of taxable tangible personal property that are delivered by motor vehicle to a Colorado address are subject to a new $0.27 retail delivery fee. Including wine.

Colorado’s new retail delivery fee applies to any retail delivery in the state that’s made by motor vehicle (including common carriers like FedEx and UPS) and contains at least one item of tangible personal property subject to the state sales or use tax. 

Since sales tax applies to sales of wine, the retail delivery fee applies to direct-to-consumer (DTC) wine shipments.

All direct wine shippers that deliver wine by motor vehicle to an address in Colorado, whether based in Colorado or another state, must collect the retail delivery fee. 

The fee is based on sales transactions. For example, if a customer purchases 12 bottles of wine in one transaction, only one retail delivery fee is due whether the wine is delivered all at once, in one shipment, or in four separate deliveries (e.g., one delivery of three bottles per quarter). 

Alternatively, if a customer orders six bottles of wine in six different sales transactions, the retail delivery fee would apply to each of the six transactions — even if all bottles ended up being delivered in the same shipment. 

Sales to wholesalers are not subject to the retail delivery fee.

Although the fee is imposed on the purchaser, it must be collected and remitted by the retailer or marketplace facilitator responsible for collecting and remitting the sales or use tax.

The Colorado Department of Revenue has confirmed that a person who does not meet the requirements to collect sales tax (i.e., does not have nexus) is not required to collect the retail delivery fee. Out-of-state wineries with no physical presence in Colorado must register for Colorado sales tax if they have economic nexus with the state: $100,000 or more of gross sales delivered in Colorado in the previous or current calendar year. Therefore, remote wineries selling beneath the $100,000 threshold may not be required to collect the retail delivery fee.

If delivery is made through a third-party delivery service and the third-party deliverer collects and remits the sales or use tax due, they must also collect and remit the retail delivery fee. 

Like sales tax, the retail delivery fee must be separately stated on invoices. 

Since the retail delivery fee is reported separately from sales tax, it requires a separate account. The Colorado Department of Revenue will automatically register you for a retail delivery account by July 1, 2022, if you have:

• An active sales tax account
• A retailer license
• Any sales tax liability reported after January 1, 2021

For registered retailers, no further registration or license is required. That said, it will be possible for a retailer to create an account after July 1, 2022. See the Department of Revenue for details.

The retail delivery fee is due at the same time as the state sales tax (monthly, quarterly, or annually, depending on your filing schedule). However, the retail delivery fee must be reported separately on a new return: the Retail Delivery Fee Return (form DR 1786). 

As it’s a statewide fee, only one return is needed. In other words, it doesn’t need to be reported to each taxing jurisdiction. However, you must remit a return for every reporting period even if you made no deliveries by motor vehicle in the state and no fee is due.

Want help collecting and remitting Colorado’s new retail delivery fee? Contact Avalara for Beverage Alcohol.

Updated June 16, 2022; originally posted June 1, 2022.