Colorado enacted changes to the state’s Retail Delivery Fee (RDF) effective in May, which should provide some relief to wineries engaged in direct-to-consumer (DtC) wine shipping in the state.
The RDF was adopted by Colorado in 2022 as a 27-cent fee that applied to all retail sales that involved the delivery of goods using motorized vehicles. Originally, all businesses, including remote sellers, that had registered with the state for sales tax purposes were required to collect and remit the RDF for all their delivery sales in Colorado.
SB23-143, as signed by Governor Jared Polis, creates a new exemption from the RDF for businesses that make less than $500,000 in annual retail sales in Colorado. This exemption became effective with the governor’s signature and applies retroactively. This means that, while Colorado consumers are not eligible for a refund for any RDF that was collected from them over the past year, businesses that had previously registered with the state to collect the RDF but that are now below the sales threshold are no longer subject to the RDF requirements.
Any DtC wine shipper that had previously registered for the RDF but makes less than $500,000 in annual retail sales in Colorado should contact the Colorado Department of Revenue to cancel their registration for the RDF. However, this law change only applies to the RDF but not to sales tax in general, so any DtC shipper that makes over $100,000 in annual retail sales is still subject to the state’s economic nexus laws and should continue to comply with the state’s sales tax requirements.
SB23-143 also removes the requirement that businesses collect the RDF from customers, instead allowing them to choose to remit the RDF out of their own pockets. While this may be more costly to a business, it does relieve them from some of the administrative hurdles involved in identifying the RDF to customers at the time of purchase.
Colorado’s adoption of the RDF in 2022 was novel yet also a potentially worrisome development due to the added administrative burdens it imposed on retailers. As such, it is heartening to see this effort to reduce the impact of the RDF obligations, though the potential for other states to follow Colorado’s lead remains.
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