If my business has Colorado nexus but no sales tax to report for a period, do I still have to register and file a Colorado sales tax return?

Plain-English summary

A company that has created sales/use tax nexus with Colorado asked whether it still has to register and file Colorado sales tax returns when it has no tax to report for a period. The Department's answer is yes.

Colorado requires a retailer that is liable for Colorado sales or use tax to obtain a retailer's business registration (a sales tax license). Once a retailer holds that license, it must file a sales tax return for every reporting period — even a period with no sales tax liability. The Department provides free online tools designed to make these "zero" filings fast (look for the "Sales Tax Zero File" option).

The license is valid for two years, but the retailer can cancel it at any time before it expires once it no longer intends to make retail or wholesale sales in Colorado and is not liable for retailer's use tax. A retailer files monthly, quarterly, or annually depending on its sales volume.

What this means for you

Business owners with a Colorado sales tax license

Holding the license is what creates the filing duty — not whether you actually collected any tax. If you have an active license, file a return every period the license is open, even if the return shows zero. Skipping "zero" periods can generate non-filing notices and penalties. If you have genuinely stopped making sales in Colorado, cancel the license so the filing obligation ends.

Out-of-state and seasonal sellers

If your activity creates Colorado nexus, you must register, and registration brings the every-period filing duty with it. Seasonal or intermittent sellers still file (often as zero returns) in their off periods until they cancel the license.

Accountants and bookkeepers

Match the filing frequency to the client's sales volume and use the Department's "Sales Tax Zero File" online option for no-activity periods. Cancelling a dormant license is the clean way to stop a string of zero returns.

Common questions

Q: I had no sales this month. Do I still file?
A: Yes. As long as you hold a Colorado sales tax license, you must file a return for the period, even if it reports no tax due. Use the Department's free zero-file option.

Q: How do I stop having to file zero returns?
A: Cancel your sales tax license once you no longer make retail or wholesale sales in Colorado and owe no retailer's use tax. The license is otherwise valid for two years.

Q: How often do I file?
A: Monthly, quarterly, or annually, depending on your sales volume.

Q: Can I rely on this letter for my business?
A: Not as a binding ruling. A General Information Letter is general guidance and is not binding on the Department. Check the FYI publications or request a private letter ruling for a determination on your facts.

Citations and references

Rules and procedure:

• 1 CCR 201-1, Rule 24-35-103.5 (general information letter / private letter ruling procedure)
• Colorado Department of Revenue "Sales Tax Zero File" online filing tool (referenced in the letter)

Source

• Landing page: Colorado Sales & Use Tax Letter Rulings
• Original PDF: GIL-09-023.pdf

Original ruling text

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

GIL-09-023
May 13, 2009
XXXXXXXXXXXX
Attn: XXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
Re: zero tax returns
Dear XXXXXXXX,
You request guidance regarding XXXXXXXX obligation to file sales tax returns. 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. You have requested a general information letter. Issue Must the Company register and file sales tax returns even if it does not have any sales tax liability for the reporting period? Discussion. We assume from your letter that the Company has engaged in activities that created nexus with Colorado for sales and use taxes. You ask whether, given that the Company has nexus with Colorado, it must then register with the Department and file sales tax returns even if it has no sales tax liability for a reporting period. Colorado law requires that a retailer obtain a retailers business registration (i.e., sales tax license) from the Department if the retailer is liable for Colorado sales or use tax. The registration is valid for two years, but the retailer may cancel it at any time before its 1375 S HE RM AN ST R EET D E NVE R, COL O RA DO 802 03

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July 16, 2021

expiration if it is no longer intends to make retail or wholesale sales in Colorado or is not liable for retailer’s use tax. So long as the retailer has a retail sales tax license, it must file a sales tax return, even if it has no sales tax obligation for the reporting period. A company can file either on a monthly, quarterly, or annual basis, depending on the company’s sales volume. The department has on-line applications specifically designed to make “zero sales tax” filings fast and convenient. See, www.TaxColorado.org and click on the “Sales Tax Zero File.” For more information about sales and use taxes or to contact the Taxpayer Service Division regarding registration, visit our web site and view the various FYI’s and other publications regarding sales and use taxes in Colorado, as well as contact information. Miscellaneous 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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