Register with the Colorado Department of Revenue if your business exceeds $100,000 in annual sales or $100,000 in Colorado sales. This threshold applies regardless of your business location. Failure to register when required results in penalties. Use the online registration system for a smoother process.
Understanding Your Tax Obligations
Colorado’s sales tax rate is 2.9%, but local jurisdictions add their own rates, resulting in rates ranging from 2.9% to 9%. Determine your exact tax rate based on the location where you make sales. Accurately track sales by location to calculate tax accurately.
File your sales tax returns monthly or quarterly, depending on your sales volume. Late filings incur penalties. Colorado offers several convenient online filing options. Maintain detailed records of your sales and tax payments for at least three years; the Colorado Department of Revenue may audit you within this timeframe.
Managing Sales Tax Nexus
Physical presence in Colorado creates sales tax nexus. This means you must collect and remit Colorado sales tax on all sales within the state. Maintaining a warehouse, office, or even regularly traveling for business purposes in Colorado could establish nexus. Remote sales exceeding a certain threshold may also create nexus, even without a physical presence in the state. Consult a tax professional if you’re unsure about your nexus status.
Regularly review your sales tax compliance to stay current with any changes in state laws and regulations. Use reputable tax software to simplify calculations and filing. This proactive approach minimizes errors and reduces the risk of penalties.
