Colorado Consumer Use Tax: When and How to Pay
A straightforward guide to Colorado's consumer use tax, helping residents properly account for tax on purchases made without paying state sales tax.
Colorado’s consumer use tax is a counterpart to the state sales tax. It applies when you buy tangible goods for use in Colorado but do not pay state sales tax at the time of purchase. This tax ensures that purchases from out-of-state sellers are taxed equitably with those from local retailers. This system supports Colorado businesses that must collect sales tax and helps fund state and local government services.
Determining When Use Tax is Owed
You owe use tax when you store, use, or consume tangible personal property in Colorado on which no state sales tax was paid. This situation often arises with online or mail-order catalog purchases where an out-of-state retailer does not collect Colorado sales tax. If you buy items from a seller who doesn’t charge the tax, the responsibility to pay it shifts to you. Another scenario involves purchasing goods in a state with a lower or no sales tax and then bringing those items into Colorado for personal use.
Calculating the Amount Due
To calculate the use tax owed, use the total purchase price of the item, which includes any delivery or shipping charges. The tax rate is a combination of the state’s 2.9% base rate plus applicable local and special district taxes for the location where the property is used. The Colorado Department of Revenue provides an online “Sales & Use Tax Rate Lookup” tool to find the precise rate for any address.
A credit is allowed for sales tax legally paid to another state. If you paid sales tax in the state of purchase, you can subtract that amount from the Colorado use tax due. For instance, if you paid a 4% sales tax on a purchase in another state and your Colorado use tax rate is 7.2%, you would only owe the 3.2% difference. If the tax paid to the other state was equal to or greater than the Colorado rate, no use tax is due. Proof of the tax paid is required to claim this credit.
How to Report and Pay the Tax
Consumer use tax must be reported and paid using the Consumer Use Tax Return, Form DR 0252. This form is filed separately from your state income tax return. You must calculate the actual use tax owed on your purchases, as previous estimation methods are no longer valid. For individuals, the return covers purchases made during a calendar year and is due by April 15th of the following year. The form can be filed electronically through the Colorado Department of Revenue’s website, and payment is submitted with the return.
Common Exemptions
Certain purchases are exempt from Colorado’s consumer use tax, just as they are from the state sales tax. This includes food for home consumption, often called groceries, but not food sold for immediate consumption from a restaurant. Other exemptions include:
- Most prescription drugs and certain medical or prosthetic devices prescribed by a licensed practitioner.
- Purchases of property that you intend to resell in the normal course of your business.
- Gasoline and special fuels that are subject to the state’s separate motor fuel excise taxes.