The Colorado Department of Revenue has issued guidance on whether the purchase price for sales tax purposes includes surcharges on credit transactions and, thus, whether such surcharges are subject to sales tax.
Under Colorado law, sales tax is imposed on retail sales of tangible personal property. The taxable purchase price is the price to the consumer, including the entire amount of money received or due in cash and credits.
Effective July 1, 2022
Colorado law will permit a seller or lessor to impose a surcharge on a buyer or lessee who elects to use a credit or charge card to make payment.
- A surcharge may not be imposed if another method of payment is used.
- The surcharge amount must be listed as a separate line item on the customer’s receipt.
Separately Stated Charges
Similarly, separately stated charges, such as transportation charges, are generally not part of the taxable purchase price if they are also separable from the sales transaction and the retailer did not shift part of the actual sales price to the separately stated charge in order to avoid sales tax.
Therefore:
- Credit card surcharges that comply with the statutory requirements
- Not used to shift part of the actual sales price
These surcharges are likewise not part of the taxable purchase price.
Reference: Colorado General Letter Information Letter No. GIL-22-004, 05/05/2022.
Frequently Asked Questions
Are credit card surcharges subject to Colorado sales tax?
Credit card surcharges are not subject to Colorado sales tax if they meet the statutory requirements, are not used to disguise part of the sales price, and are listed as separate line items on the receipt.
When did Colorado allow surcharges on credit card transactions?
As of July 1, 2022, Colorado law allows sellers or lessors to impose a surcharge on buyers who choose to pay with credit or charge cards, provided certain conditions are met.
Do surcharges apply if I pay with cash or debit?
No, a surcharge may only be applied if a credit or charge card is used. It cannot be imposed on other forms of payment such as cash, check, or debit.
What must be shown on the receipt regarding surcharges?
The credit card surcharge must be clearly listed as a separate line item on the receipt in order to qualify as non-taxable under Colorado law.
How does Colorado define a taxable purchase price?
The taxable purchase price includes the total amount paid by the consumer, including cash and credits, unless specifically excluded by law, such as qualified, separately stated surcharges.