Can a Colorado retailer sell items at an even, tax-included price instead of adding sales tax separately at the register?
Plain-English summary
A Colorado shooting club that regularly buys ammunition and reloading components for resale wants to sell them at even dollar amounts with the sales tax already baked into the price, and it doesn't give customers a receipt. It asked whether that's allowed, and if so whether it has to tell the buyer how much tax is included.
The Department's answer: generally no — at least not silently. Colorado law expressly requires the tax to be visible to the buyer:
- The statute (§ 39-26-108) makes it unlawful for a retailer to "advertise or hold out or state to the public or to any customer, directly or indirectly, that the tax … will be assumed or absorbed by the retailer or that it will not be added to the selling price … or if added that it … will be refunded."
- The regulation (Department Regulation 39-26-108) says every retailer — except one selling liquor by the drink that elects to include the tax in the price, and except vending-machine operators — "shall collect sales tax on all taxable sales as an item separate and distinct from the selling price," and it's a misdemeanor to hold out that the tax will be assumed, absorbed, or refunded, or won't be added to the price.
So the club can't just bury the tax in an even price and say nothing. To sell at even amounts, it must either:
- provide an invoice for the sale that separately states the price and the tax, or
- post a conspicuous sign that shows the price of each item and separately states the amount of tax for each item offered for sale.
What this means for you
Retailers and cash businesses
You can't quietly absorb sales tax into a round price in Colorado. The tax has to be collected and shown separately — that's a statutory disclosure rule, not just a bookkeeping preference, and violating it is a misdemeanor. If you want even-dollar pricing (common at ranges, bars, festivals, and concession stands), make the tax visible: hand over a receipt that itemizes the tax, or post clear signage breaking out each item's price and tax.
Shop owners who don't give receipts
"No receipt" doesn't get you out of the disclosure rule. If you skip invoices, you need the conspicuous-sign route — each item's price and its separate tax amount posted where customers can see them.
Accountants and tax professionals
The governing authority is § 39-26-108 and its regulation: tax collected separate and distinct from the selling price, with narrow exceptions (liquor-by-the-drink electing to include, and vending machines). Tax-inclusive even-dollar pricing is only compliant if paired with itemized invoices or conspicuous per-item signage. Watch the home-rule-city caveat below — self-collected cities may have their own rules.
Common questions
Q: Can a Colorado retailer include sales tax in the sticker price?
A: Not silently. Tax must be collected as an item separate and distinct from the selling price. To use tax-included even pricing, the retailer must either give an invoice that separately states the tax or post a conspicuous sign showing each item's price and separate tax.
Q: Is it illegal to say "we'll cover the tax"?
A: Yes. It's unlawful — and a misdemeanor under the regulation — for a retailer to hold out that it will absorb the tax or that the tax won't be added to the price.
Q: Are there any exceptions?
A: Yes — liquor sold by the drink where the seller elects to include the tax in the price, and vending-machine operators. The shooting club isn't either of those.
Q: We don't give receipts — what do we do?
A: Use the signage route: post a conspicuous sign showing the price of each item and separately stating the amount of tax for each item.
Q: Can I rely on this letter?
A: No. A General Information Letter is general guidance, is not binding on the Department, and makes no determination on any specific facts. It also doesn't cover self-collected home-rule city taxes.
Citations and references
Statutes and rules:
- § 39-26-108, C.R.S. (unlawful to absorb the tax or not add it to the selling price)
- Department Regulation 39-26-108 (tax collected separate and distinct from the selling price; misdemeanor to state otherwise; exceptions for liquor-by-the-drink electing to include, and vending machines)
Source
- Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
- Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-13-001.pdf
Original ruling text
Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]
GIL-13-001
January 24, 2013
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX
Re: Purchase Price That Includes Sales Tax
Dear XXXXXXXXXXXXX,
You submitted on behalf of a shooting club (“Company”) a request for guidance to determine
whether it is permissible for Company to sell retail items at a stated price that includes sales
tax.
The Colorado Department of Revenue (“Department”) issues general information letters and private
letter rulings. A general information letter provides a general overview of the relevant tax issues
and is not binding on the Department. A private letter ruling provides a specific determination for a
specific set of facts, is binding on the Department but not on the taxpayer, and requires payment of
a fee. For more information about general information letters and private letter rulings, please see
Department regulation 24-35-103.5 at www.colorado.gov/revenue/tax > Tax Library > Rulings.
The Department initially treats your request as one of a general information letter. If you would like
the Department to issue a private letter ruling on the issues you raise, you can resubmit a request
and fee in compliance with regulation 24-35-103.5. It is important to remember that general
information letters, such as this one, are general discussions of tax law and are not a determination
of the tax consequence of any particular action or inaction.
Issue
Is Company allowed to sell retail items at a stated price that includes sales tax? If so, must Company
advise the purchaser, either verbally or by signage, that the price paid by purchaser includes sale tax
and specifically how much sales tax the purchaser is paying?
Background
Company is a shooting club located in Colorado that regularly purchases ammunition and reloading
components for resale. Company would like to sell these items for an even amount. Company does
not furnish customers with a receipt for their purchases.
Discussion
Colorado law expressly states that a retailer must disclose to the buyer the amount of tax paid on a
transaction.
“It is unlawful for any retailer to advertise or hold out or state to the public or to any
customer, directly or indirectly, that the tax or any part thereof imposed by this part 1
[sales tax] will be assumed or absorbed by the retailer or that it will not be added to the
selling price of the property sold or if added that it or any part thereof will be
refunded.”1
The Department promulgated a regulation that further explains this prohibition.
Every retailer or vendor, except one selling malt, vinous or spirituous liquors by the
drink and electing to include the tax in the selling price, and except vending machine
operators, shall collect sales tax on all taxable sales as an item separate and distinct
from the selling price. It is a misdemeanor for a vendor, with the above exceptions, to
hold out or state, directly or indirectly, that the tax or any part thereof will be assumed,
absorbed or refunded by the vendor or that the tax will not be added to the purchase
price.2
Therefore, Company must either provide an invoice for the sale and separately state the
price for the tax or have a conspicuous sign that shows the price of each item and separately
states the amount of tax for each item offered for sale.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are knowledgeable on
state taxes issues. However, the Department does not make a specific determination here on any
of the issues raised and the Department is not bound by this general information letter.
The Department administers state and state-administered local sales and use taxes. This letter
does not address sales and use taxes administered by home-rule cities and home-rule counties.
You may wish to consult with local governments which administer their own sales or use taxes
about the applicability of those taxes. Visit our web site at www.colorado.gov/revenue/tax for more
information about state and local sales taxes.
Enclosed is a redacted version of this letter. Pursuant to statute and regulation, this redacted letter
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 letter.
1 §39-26-108, C.R.S.
You can view statutes on the Department’s web site at www.colorado.gov/revenue/tax > Tax
Library > Statutes.
2 Department Regulation 39-26-108. You can view regulations on the Department’s web site at
www.colorado.gov/revenue/tax > Tax Library > Regulations > Final Regulations > Sales and Use Tax.
2
Sincerely,
Office of Tax Policy
Colorado Department of Revenue
3