How to Implement Colorado Retail Delivery Fee in Shopify Store

Introduction

As of July 1, 2022, Colorado implemented a new Retail Delivery Fee (RDF) that affects many online retailers. This fee applies to all deliveries by motor vehicle to a location in Colorado with at least one item of tangible personal property subject to state sales or use tax. For Shopify merchants selling to customers in Colorado, understanding and implementing this fee is crucial for compliance. In this guide, we’ll explore how to add the Colorado Retail Delivery Fee to your Shopify store, potential challenges, and solutions.

Understanding the Colorado Retail Delivery Fee

What is the Retail Delivery Fee?

The Colorado Retail Delivery Fee is a $0.27 charge that must be added to applicable orders. It’s important to note that this is a fee, not a tax, and needs to be handled differently in your accounting and reporting processes.

When Does It Apply?

The fee applies to:

• Deliveries made by motor vehicle
• Orders shipped to a Colorado address
• Orders containing at least one item subject to state sales or use tax

Reporting Requirements

Merchants are required to:

• Collect the fee on applicable orders
• Report and remit the fees quarterly
• Show the fee as a separate line item at checkout

Shopify’s Solution for the Retail Delivery Fee

Automatic Implementation

The good news for Shopify merchants is that the platform has rolled out an automatic solution for the Colorado Retail Delivery Fee. As of July 1, 2022, Shopify automatically collects the $0.27 fee on taxable sales delivered to customers in Colorado.

How It Works

• The fee is automatically added to applicable orders
• It appears as a separate tax line item in order details
• The fee is included in your sales tax report as “Colorado Retail Delivery Fee”

No Manual Setup Required

Shopify merchants don’t need to take any action in their admin panel to implement this fee. The system handles it automatically for orders that meet the criteria.

Challenges and Considerations

Separate Line Item Requirement

While Shopify includes the fee automatically, some merchants have noted that it may not always appear as a separate line item on customer-facing documents, which is a requirement of the Colorado law.

Tax-Exempt Orders

The fee should not apply to tax-exempt orders. Shopify’s implementation seems to handle this correctly by tying the fee to taxable sales.

In-Store Pickup

Some merchants have reported issues with the fee being applied to in-store pickup orders, which should be exempt from the RDF.

Solutions and Workarounds

Customizing Order Receipts

For merchants who need to ensure the fee appears as a separate line item on customer receipts, customizing the order receipt template may be necessary. Here’s a sample code snippet that can be added to the Order Printer template:

{% if shipping_address.province == 'Colorado' %}
  Taxes include CO $.27 RDF
{% endif %}

Adjusting for In-Store Pickup

If you offer in-store pickup and are experiencing issues with the fee being applied incorrectly, you may need to:

1. Contact Shopify support for assistance
2. Consider using a third-party app that allows for more granular control over fees and charges

Reporting and Remittance

Remember that while Shopify collects the fee, merchants are responsible for reporting and remitting it to the Colorado Department of Revenue. Ensure you’re prepared to:

• File the DR 1786 form
• Remit the collected fees on the same schedule as your Colorado sales tax

Recent Updates and Exemptions

Small Business Exemption

As of 2023, Colorado has updated the legislation to exempt small businesses from the Retail Delivery Fee. Businesses with $500,000 or less in retail sales during the prior calendar year are not required to collect, report, or remit the fee.

Implications for Shopify Merchants

If your business qualifies for this exemption:

1. You may need to contact Shopify support to have the automatic fee collection disabled for your store
2. Ensure you’re not collecting the fee from customers if you’re exempt
3. If you’ve collected fees while exempt, you must either remit them to the state or refund customers

Conclusion

Implementing the Colorado Retail Delivery Fee in Shopify has been made relatively straightforward thanks to the platform’s automatic solution. However, merchants should remain vigilant about the specifics of their implementation, especially regarding separate line item display and exemptions for in-store pickup or small businesses. By understanding the requirements and utilizing the tools and workarounds available, Shopify merchants can ensure compliance with Colorado’s Retail Delivery Fee regulations while maintaining a smooth checkout experience for their customers.

Remember to stay informed about any future changes to the legislation and how they might affect your e-commerce operations. For the most up-to-date information, always refer to the official Colorado Department of Revenue website and consult with a tax professional for advice tailored to your specific situation.