Can a Colorado retailer advertise or post total 'out-the-door' prices that already include the sales tax, as long as the receipt breaks out the price and the tax separately?

Plain-English summary

A retailer asked about posting total “out-the-door” prices that include sales tax. The Department did not approve or reject a proposed sign or pricing practice. It described two obligations and expressly made no specific determination.

First, a retailer must separately state the sales or retailer's use tax on a receipt, invoice, or other document showing the purchase price. If no such document is issued, the retailer must disclose the tax on signage clearly visible to the purchaser. Stating only the tax rate is insufficient. Second, the retailer must not advertise, directly or indirectly, that it will assume or absorb the tax, will not add it, or will refund it.

The GIL says both obligations apply. It does not conclude that a particular tax-included posted price satisfies them.

What this means for you

A retailer considering total-price advertising should assess its receipt or signage and advertising language against both duties. This letter does not preapprove a tax-included sign or decide whether a particular promotion complies.

Common questions

Q: Does the GIL say a retailer may post tax-included total prices?
A: It describes the separate-statement and no-absorption-advertising rules but makes no specific determination about the requested pricing practice.

Q: What must a receipt show?
A: When a receipt or other price document is issued, the tax must be separately stated as a distinct item. A tax rate alone is insufficient under the Department's discussion.

Q: What advertising does the letter identify as prohibited?
A: It says a retailer may not advertise that it will assume or absorb the tax, will not add it to the price, or will refund it.

Citations and references

Statutes and rules:

• § 39-26-104(1), C.R.S. (imposition of sales tax)
• § 39-26-106(2)(a), C.R.S. (retailer must add the tax and show it as a separate and distinct item)
• § 39-26-108, C.R.S. (no advertising that the retailer absorbs, won't add, or will refund the tax)
• § 39-26-703(2)(c.5), C.R.S. (refund of tax collected in error)
• 1 CCR 201-4, Rule 39-26-106-1 (separate statement of tax on receipts, or on signage if no receipt)
• 1 CCR 201-1, Rule 24-35-103.5 (general information letter and private letter ruling procedure)

Case law:

• J.A. Tobin Constr. Co. v. Weed, 407 P.2d 350 (Colo. 1965) (consumer pays, retailer collects the tax)

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-22-002.pdf

Original ruling text

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

GIL 22-002
April 14, 2022
XXXXXXXXXXXX
Via Electronic Mail: XXXXXXXXXXXX
Re: Posting total, “out-the-door” prices that include sales tax Dear XXXXXXXXXXXX: You submitted a request for a general information letter regarding whether a vendor is allowed to post total, “out-the-door” prices that include sales tax in a store or on marketing materials. 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, but 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, and requires payment of a fee. For more information about general information letters and private letter rulings, please see 1 CCR 201-1, Rule 24-35-103.5. Issue Whether a retailer is allowed to post total, “out-the-door” prices that include the sales tax on marketing materials or on signage in the store, if the retailer provides a receipt with each sale that shows the purchase price and the applicable tax imposed as separate and distinct items. Discussion Colorado imposes a sales tax on retail sales of tangible personal property and certain services.1 The consumer is required to pay the sales tax, and the retailer is required to collect it.2 The retailer is liable to the Department for all sales tax collected and for any tax not collected.3 If sales tax is collected in error, the consumer has a right to claim a refund from the Department.4 With respect to statements made by retailers to consumers regarding sales tax, Colorado imposes two obligations on retailers, one affirmative and one negative. First, statute provides that the retailer is required to add the tax imposed to the purchase price, showing the tax as a separate and distinct item.5 The Department’s rule clarifies that if the retailer issues the consumer a receipt, invoice, or other document setting forth the purchase price, the retailer must separately state the sales tax or retailer’s use tax on the document.6 If the retailer does not issue such a document, 1 Section 39-26-104(1), C.R.S. 2 Section 39-26-106(2)(a), C.R.S. and J.A. Tobin Constr. Co. v. Weed, 407 P.2d 350 (Colo. 1965). 3 Sections 39-26-105(1)(a)(I)(A), 39-26-115, 39-26-118, C.R.S. 4 Section 39-26-703(2)(c.5), C.R.S. 5 Section 39-26-106(2)(a), C.R.S.. 6 1 CCR 201-4, Rule 39-26-106-1 (1).

GIL 22-002
April 14, 2022
Page 2
then the retailer must disclose the tax of each item on signage clearly visible to the purchaser.7 Merely stating the tax rate on a document is not sufficient.8 Second, a retailer may not, directly or indirectly, advertise to the public or to a consumer that the retailer will assume or absorb sales tax, that the retailer will not add sales tax to the purchase price, or, if added, that the retailer will refund the sales tax.9 Both obligations must be met, and meeting one obligation does not permit a retailer to avoid the second. 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 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 self-collected home-rule cities. You may wish to consult with those local governments that administer their own sales or use taxes about the applicability of those taxes. Visit our website at tax.colorado.gov for more information about state and local sales taxes. Thank you for your request. Sincerely, Office of Tax Policy Colorado Department of Revenue

7 1 CCR 201-4, Rule 39-26-106-1 (1).
8 1 CCR 201-4, Rule 39-26-106-1 (1).
9 Section 39-26-108, C.R.S. Whether any particular marketing material or signage violates this requirement would

require the analysis of all relevant facts. which cannot be done in a general information letter.