What is a Service Fee?
A service fee (also known as a vendor fee) is a percentage of the sales tax collected that a retailer is allowed to retain in order to cover the expenses incurred by collecting and remitting state sales tax. The purpose of the state sales tax service fee is to assist Colorado retailers in complying with the obligation to collect and remit sales tax, but fewer than 2% of all retailers retain nearly ⅔ of all vendor fees retained, an amount exceeding $50 million annually.1
Changes to the Service Fee
Effective January 1, 2020, the state service fee increases from 3.33% to 4% and is capped at $1,000 per filing period at the account level. This limit applies to the company as a whole, regardless of the number of locations. Additionally, retailers with multiple locations will be required to consolidate all locations into one account (if the retailer did not initially set up their account in this way).
If the combined Colorado state service fee calculated on all of the retailer’s sales tax returns for all sites/locations for the filing period exceeds $1,000, the retailer must complete the State Service Fee Worksheet (DR 0103). The worksheet is used to determine what amount, if any, the retailers must add to the total balance due calculated on the retailer’s returns. Visit the Sales & Use Tax Forms web page for additional sales tax forms you will need to file your return.