May a retailer calculate Colorado sales tax by multiplying the sale by the tax rate percentage instead of using sales tax charts?

Plain-English summary

A company asked whether it may calculate Colorado sales tax by multiplying the taxable sale by the tax rate percentage instead of using sales tax charts (the bracket tables). The Department's answer: yes — and in fact the Department does not authorize the use of sales tax charts.

Compute by percentage. Colorado's sales tax is stated as a percentage (the state rate is currently 2.9%) under § 39-26-106(1)(a)(II). Sales tax is computed by multiplying the tax-rate percentage times the sales price.

Rounding (Reg. (39)26-109).
- On an invoice, round the tax to the nearest penny — up when the tax is greater than 0.5 cent, down when it's less than 0.5 cent.
- On the return, entries are rounded to the nearest dollar: amounts under 50 cents round down to zero, and amounts 50–99 cents round to the nearest dollar.
- Rounding is required/allowed only on the return. Your books, records, invoices, and other sales tax documents must reflect the actual tax amounts — don't bake return-rounding into your invoices.

The 17-cent threshold (§ 39-26-106(1)(a)(II); Reg. (39)26-106.2(a)). No sales tax applies when an item's price is 17 cents or less. But tax does apply when several items are purchased, one or more of them is 17 cents or less, and the total price of all items is more than 17 cents.

(For local rates, the Department administers state and state-collected local taxes but not self-collected home-rule jurisdictions — see DR 1002 and the Department's online Sales Tax Information System.)

What this means for you

Retailers and POS-system setup

Configure your point-of-sale to compute tax as rate × taxable price (state 2.9% plus applicable local rates), not from a bracket chart. Show the actual computed tax (rounded only to the nearest penny) on invoices and in your records. Don't apply the nearest-dollar rounding except when filling out the return.

Bookkeepers and accountants

Keep two rounding rules straight: penny-level on invoices, dollar-level on the return (under 50¢ → 0; 50–99¢ → up). Your books must tie to the actual tax collected, not the rounded return figures. Remember the 17-cent de minimis rule and its multi-item exception.

Anyone still using tax charts

The Department doesn't authorize sales tax charts for Colorado. Switch to the percentage calculation to stay compliant.

Common questions

Q: Can I calculate Colorado sales tax with a percentage instead of a chart?
A: Yes. Multiply the taxable price by the rate (state 2.9% plus local). The Department does not authorize the use of sales tax charts.

Q: How do I round?
A: On invoices, to the nearest penny (over 0.5¢ up, under 0.5¢ down). On the return, to the nearest dollar (under 50¢ down to zero; 50–99¢ up). Rounding belongs only on the return; records must show actual amounts.

Q: Is a 15-cent item taxable?
A: Not by itself — no tax applies to an item priced 17 cents or less. But if it's bought with other items and the total exceeds 17 cents, tax applies to the sale.

Citations and references

Statutes, rules, and publications:
- § 39-26-106(1)(a)(II), C.R.S. (state rate, currently 2.9%; 17-cent threshold)
- Reg. (39)26-109 (rounding of sales tax); Reg. (39)26-106.2(a) (17-cent threshold; multiple items)
- DR 1002 (state-administered vs. self-collected home-rule jurisdictions)

Related rulings

• [[gil-09-005-sales-tax-responsibility-for-motor-vehicle-leases]] — who collects state vs. local tax
• [[gil-11-006-taxability-of-manufacturer-s-coupons]] — computing the taxable base (coupons)
• [[gil-11-009-taxability-of-manufacturer-rebates]] — computing the taxable base (rebates)

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-09-016.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-2009-016
July 7, 2009

xxxxxxxxxxxxx
Attn: XXXXXXXXX
xxxxxxxxxxxxx
xxxxxxxxxxxxx

Re: percentage tax v sales tax charts

Dear XXXXXXXXXX,
This letter is in response to the letter you submitted on behalf of XXXXXXXXXX
("Company") regarding the use of percentages or tax charts to calculate sales tax in
Colorado.
The Department issues general information letters and private letter rulings. A general
information letter provides a general overview of the applicable tax law, does not
provide a specific determination, and is not binding on the department. A private letter
ruling is a determination of the applicability of tax to a specific set of circumstances and
is binding in the department. A party requesting a private letter ruling must provide
certain information and remit a fee. For more information about general information
letters and private letter rulings, please refer to the Department's regulation 24-35103.5, C.R.S., which is available on our web site at: www.colorado.gov/revenue/tax.

I will initially treat your request as one for a general information letter because the

request does not contain the information or fee necessary for a private letter ruling.
You may resubmit this request as a request for a private letter ruling.
Issue
May the Company calculate sales tax by multiplying the taxable sales amount by the
sales tax percentage rather than calculating the sales tax by using sales tax charts?
Discussion
Colorado levies a sales tax and this tax is stated as a percentage (currently 2.9%).
137 5 SHERMAN STREET
DENVER, COLORADO 80203

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July 7, 2009

§39-26-106(1)(a)(II), C.R.S. Sales tax is computed by multiplying the tax rate
percentage times the sales price. Sales tax on an invoice shall be rounded up to the
nearest penny for tax greater than .5 cent and rounded down to the nearest penny for
tax that is less than .5 cent. All entries on the sales tax return must be rounded up to
the nearest dollar. Tax amounts on periodic sales tax returns that are less than fifty
cents must be rounded down to zero cents and amounts on those returns that are fifty
to ninety-nine cents must be rounded to the nearest dollar. Rounding is required and
allowed only on the tax return. The retailer's books, records, invoices, and other sales
tax documents must reflect actual tax amounts. Department regulation {39)26-109.
Sales tax does not apply in cases where the price of an item is seventeen cents or
less. Sales tax does apply where several items are purchased, the price of one or
more items is seventeen cents or less, and the total price of all items is more than
seventeen cents. §39-26-106{1){a)(II), C.R.S. and department regulation {39)26106.2(a). The department does not authorize the use sales tax charts to compute
sales tax.
Miscellaneous
Please note that the department administers state and state-collected city and county
sales taxes and special district sales and use taxes, but does not administer sales and
use taxes for self-collected home rule cities and counties. The department maintains a
list of state-administered local jurisdictions as well as self-collect home-rule cities and
counties. See, department publication DR 1002. The department has numerous
resources to assist retailers with sales and use tax questions, including publications
and on-line applications for determining sales tax rates for local jurisdictions. These
resources are easily accessed on the department's web site at: www.taxcolorado.org.
Click on "Tax" > "Publications/ Resources."
Enclosed is a redacted version of this ruling. Pursuant to statute and regulation, this
redacted version of the ruling will be made public within 60 days of the date of this
letter. Please let me know in writing within that 60 day period whether you have any
suggestions or concerns about this redacted version of the ruling.

Sincerely,

Office of Tax Policy
Colorado Department of Revenue

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