If a Colorado retailer adds a credit-card surcharge to a sale, is that surcharge part of the taxable purchase price — meaning the customer pays sales tax on it too?

Plain-English summary

The Colorado Department of Revenue addressed a question many retailers ask: when you add a credit-card surcharge to a sale, do you have to charge sales tax on the surcharge too? The general guidance: no, as long as the surcharge follows the rules.

Colorado sales tax is imposed on the purchase price — the total price to the consumer, including all money received in cash and credits. So the starting question is whether a credit-card surcharge is part of that purchase price.

Colorado's surcharge statute, § 5-2-212, C.R.S. (added by Senate Bill 21-091, effective July 1, 2022), lets a seller impose a surcharge on customers who choose to pay with a credit or charge card instead of cash, check, or similar means — but only under conditions:

• You may not impose the surcharge if the customer pays by cash, check, debit card, debit payment, or gift card.
• You must show the surcharge as a separate line item on the customer's receipt.

The Department reasoned by analogy to charges that fall outside the taxable purchase price — like separately stated interest and finance charges, or separable and separately stated transportation charges. The key principles: a charge can sit outside the taxable price when it's genuinely separate and separately stated, and a retailer can't shift part of the real sales price into the side charge to avoid tax. Because a compliant surcharge is, by statute, only imposed on the credit-payment choice and is separately stated on the receipt, the Department concluded that a surcharge meeting the § 5-2-212 requirements — and not used to hide real sales price — is not part of the taxable purchase price.

The flip side: if a surcharge doesn't comply with § 5-2-212, or is used to move actual sales price into the surcharge line to dodge tax, it wouldn't get this treatment.

What this means for you

Retailers and businesses adding card surcharges

If you surcharge credit-card payments, structure it to match § 5-2-212: only apply it when the customer chooses a credit or charge card (never on cash, check, debit, or gift-card payments), and break it out as its own line item on the receipt. Done that way, you don't add sales tax on top of the surcharge — it's outside the taxable purchase price. Don't try to bury part of your actual price in the "surcharge" to shrink the taxable amount; the Department flags that as a disqualifier, and § 5-2-212 carries its own consumer-protection conditions you must also follow.

Accountants and tax professionals

The reasoning rests on the purchase-price definition (§ 39-26-102(7)(a)) and an analogy to separately stated, separable charges (1 CCR 201-5, Special Rule 18; 1 CCR 201-4, Rule 39-26-102(7)(a) for finance charges). The operative gate is statutory compliance with § 5-2-212 plus the no-price-shifting rule. Because this is a GIL, it's guidance, not a binding determination — and § 5-2-212 has non-tax requirements (and surcharge caps) worth confirming separately. Watch the home-rule-city caveat.

Common questions

Q: Do I charge Colorado sales tax on a credit-card surcharge?
A: Generally no, if the surcharge complies with § 5-2-212 — applied only to credit/charge-card payments, shown as a separate line item, and not used to disguise actual sales price. Such a surcharge isn't part of the taxable purchase price, so sales tax doesn't apply to it.

Q: What would make the surcharge taxable?
A: Not following the § 5-2-212 conditions, or using the surcharge to shift part of your real sales price off the taxable base. In those cases the amount is treated as part of the purchase price and is taxed.

Q: Can I surcharge debit-card or cash payments?
A: No. The statute prohibits imposing the surcharge when a customer pays by cash, check, debit card, debit payment, or gift card. It's specifically a credit/charge-card surcharge.

Q: Can I rely on this letter for my business?
A: Not as binding authority. A General Information Letter is general guidance only and is not binding on the Department; it reflects the good-faith opinion of Department personnel and makes no specific determination. It also doesn't address self-collected home-rule city taxes.

Citations and references

Statutes and rules:
- § 39-26-104(1)(a), C.R.S. (sales tax imposed on the purchase price)
- § 39-26-102(7)(a), C.R.S. (definition of taxable "purchase price")
- § 5-2-212, C.R.S. (Senate Bill 21-091; conditions for imposing a credit-card surcharge, effective July 1, 2022)
- 1 CCR 201-4, Rule 39-26-102(7)(a) (interest and finance charges excluded from purchase price)
- 1 CCR 201-5, Special Rule 18 (separable and separately stated charges)
- 1 CCR 201-1, Rule 24-35-103.5 (general information letter and private letter ruling procedure)

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-22-004.pdf

Original ruling text

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

GIL 22-004
May 5, 2022
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Re: Surcharges on Credit Transactions
Dear XXXXXXXXXX:
You submitted a request for a general information letter regarding the applicability of Colorado sales tax
to surcharges on credit transactions. 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 the purchase price for Colorado sales tax purposes includes surcharges on credit transactions
imposed in accordance with section 5-2-212, C.R.S., thus subjecting the surcharges to sales tax.
Discussion
Colorado imposes a sales tax on retail sales of tangible personal property.1 The tax is imposed upon the
purchase price paid or charged.2 The taxable “purchase price” is the price to the consumer, and includes
the entire amount of money received or due in cash and credits. 3
When Senate Bill 21-091 takes effect on July 1, 2022, section 5-2-212, C.R.S., will permit a seller or
lessor to impose a surcharge on a buyer or lessee who elects to use a credit or charge card in lieu of
payment by cash, check, or similar means.4 Imposition of the surcharge will be subject to certain
conditions.5 For instance, a seller or lessor may not impose a surcharge if the customer elects to pay by
cash, check, debit card, debit payment, or gift card. 6 Furthermore, the seller or lessor must provide the
surcharge amount as a separate line item on the customer’s receipt.7

1 Section 39-26-104(1)(a), C.R.S.
2 Id.
3 Section 39-26-102(7)(a), C.R.S.; 1 CCR 201-4, Rule 39-26-102(7)(a), paragraph (1).
4 2021 Colo. Sess. Laws 3404; Section 5-2-212 (1)(a), C.R.S. (effective July 1, 2022).

References in this letter to
section 5-2-212, C.R.S. are to that section as amended by Senate Bill 21-091.
5 This letter discusses, in a general fashion, only those conditions relevant to this issue. Refer to section 5-2-212,
C.R.S., and related statutes and rules, for a complete understanding of the requirements and restrictions.
6 Section 5-2-212(1)(e), C.R.S.
7 Id. at (1)(d).

GIL 22-004
May 5, 2022
Page 2

In some cases, amounts charged in connection with the retail sale of tangible personal property are not
part of the taxable purchase price. For instance, the taxable purchase price generally excludes
separately stated interest and finance charges.8 Similarly, transportation charges are not part of the
taxable purchase price if they are both separable from the sales transaction and stated separately on a
written invoice or contract.9
The rule for transportation charges sets forth several rules useful for analyzing this issue. First, the
charge must be separable from the sales transaction. 10 Charges are separable if they are performed
after the taxable property is offered for sale and the seller allows the purchaser to elect the seller’s
transportation services (and incur the charge) or some alternative including self-pickup (and avoid the
charge).11 Second, the charge must be separately stated. 12 Separate statement requires that the
charges be set forth separately on a written document issued in connection with the sale.13 Finally, the
rule prohibits a retailer from shifting part of the actual sales price to the transportation charge in order to
avoid the sales tax.14
As noted above, a seller or lessor may not impose a surcharge if the customer elects to pay by cash,
check, debit card, debit payment, or gift card. Furthermore, the seller or lessor must provide the
surcharge amount as a separate line item on the customer’s receipt. Therefore, surcharges that comply
with the statutory requirements, and are not used to shift part of the actual sales price to the surcharge,
are not part of the taxable purchase price.
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

8 1 CCR 201-4, Rule 39-26-102(7)(a), paragraph (4).
9 1 CCR 201-5, Special Rule 18, paragraph (1).
10 Id. at (1)(b).
11 Id.
12 Id. at (1)(c).
13 Id.
14 Id. at (1)(e).