Recent Bill Passed For Sales Tax Relief – Is Your Colorado Restaurant Eligible?

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What is House Bill 21-1265: Sales Tax Relief for Bars, Restaurants, Caterers, and Mobile Food Retailers?

sales tax relief for qualifying CO restaurantsHB 21-1265 allows qualifying retailers to claim a limited special deduction from state taxable sales under certain conditions to retain and spend the resulting state sales tax. The deduction is available for sales made in June 2021, July 2021, and August 2021.

This will apply to returns that will be filed in July 2021, August 2021, and September 2021; it is similar to the law signed last December allowing retention of up to $2000 in-state sales taxes collected for each month in November – December 2020 and January – February 2021.

Eligible retailers are still 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.

What establishments qualify for the Sales Tax Relief?

Qualifying establishments include retailers engaged in selling prepared foods and alcoholic beverages for immediate consumption, bars, restaurants, cafes, quick serves, food trucks and catering industry.

Qualified retailers may retain up to $2,000 of the state sales tax payment each month by deducting from the net 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 deferral on as many as five physical locations and five mobile food trucks as well per month. A retailer in the Catering industry may deduct from the state net taxable sales for all events of $70,000.

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 effective date of the Bill?

This bill allows for qualifying retailers to retain up to $2,000 of the State taxes collected in June 2021 – August 2021. All monthly sales tax returns are still required to be timely filed.

“This 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, mobile food services industry, and catering 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-10 in Colorado.” More can be found on the legislation here.

What are the penalties if the law is 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 help our clients with the Sales Tax Relief?

For any *qualifying Colorado bar or restaurant, RASI will automatically take the allowable deduction from your net taxable sales on the Colorado State Sales Tax return for the months of June 2021 – August 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 request.