Colorado Provides Limited Special Deduction from State Taxable Sales

In a welcome change from new sales tax burdens on businesses, the state of Colorado has announced via HB22-1406 (Qualified Retailer Retain Sales Tax) renewal for July, August and and September 2022, a limited special deduction from state taxable sales. Eligible retailers must continue to collect all applicable local sales taxes, file timely returns and pay local sales taxes. However, they are allowed to take a deduction from their Colorado Sales Tax Return (form DR 0100) and can retain and spend the resulting sales tax.  

Eligible retailers include:

• Bars
• Restaurants
• Hotel-Operated Restaurants, Bars, and Catering Services
• Food Services Contractors

While the limited special deduction is welcome, as with all state sales tax changes, it brings some additional compliance challenges.

• This special deduction applies only to a limited amount of state taxable sales and is limited to no more than five physical reporting site .
• Eligible retailers are required to collect all applicable state and state-administered local sales taxes, file returns on time, and pay all local sales taxes (in addition to state sales taxes in excess of the amount related to the special deduction).
• The special deduction does not apply to any taxes imposed by any state-administered city, county, or special district.

To claim the special deduction and to retain and spend the resulting state sales tax, businesses must complete the Colorado Sales Tax Return (form DR 0100) in accordance with instructions on the Colorado Department of Revenue site here:  Restaurant & Bar Special Sales Tax Deduction Instructions | Department of Revenue – Taxation (colorado.gov).

Smith and Howard’s sales and use tax team stays on top of sales and use tax filing requirements in every state, including Colorado. We would be happy to speak with you about how businesses are spending more time focusing on growth because we’re doing the work on their sales tax compliance. Click the Contact An Advisor button to connect with our team.