HB20B-1004: Colorado State Temporary Sales Tax Deduction & Retention for Restaurants and Bars – What is the Law?
To assist businesses in the state of Colorado Governor Polis on December 7, 2020, signed a bill that allows qualifying retailers to retain up to $2,000 in state sales tax collection each month for the next four months.
*Qualifying establishments include retailers engaged in selling prepared foods and alcoholic beverages for immediate consumption; bars, restaurants, cafes, quick serves, food trucks. This does not include offsite catering or any type of sales involving unprepared or frozen foods or nonphysical site reported.
Qualified retailers may retain up to $2,000 of the state sales tax payment each month by deducting from net taxable sales on the Colorado State Sales Tax return the lesser of the following:
- state net taxable sales or
- $70,000 of net taxable sales
The business will then retain the associated 2.9% state sales tax collected. A single retailer is permitted to take advantage of the state sales tax relief on as many as five physical locations and five mobile food trucks as well per month.
The allowable deduction only applies to state sales taxes collected. The deduction does NOT apply to payment of city, county, or special district sales taxes collected by the Colorado Department of Revenue.
What is the rollout timing?
This bill allows for qualifying retailers to retain up to $2,000 the state taxes collected in November—2020, December—2020, January—2021 & February—2021. All monthly sales tax returns are still required to be timely filed.
“The bill allows a temporary deduction from state net taxable sales for qualifying retailers in the alcoholic beverages drinking places industry, the restaurant and other eating places industry, and the mobile food services industry in the state in order to allow such qualified retailers to retain the resulting sales tax collected as assistance for lost revenue as a result of the economic disruptions due to the presence of COVID-19 in Colorado.”
What are the penalties if not followed?
In order to avoid penalties, it is required to timely file the state sales tax return and pay any remaining state sales tax due above the allowable retained amount. Additionally, city and other state-administered local taxes must be timely paid.
How can RASI assist?
Any *qualifying Colorado bar or restaurant RSI will automatically take the allowable deduction from your net taxable sales on the Colorado State Sales Tax return for the months of November—2020, December—2020, January—2021 & February—2021.
If you want to Opt-Out & NOT take advantage of this relief granted by the state of Colorado, please reach out to your RASI Tax Specialist via support