Sales Tax Savings Opportunity for Restaurant Companies with Locations in Colorado
Colorado has recently renewed a limited time sales tax deduction for restaurants and other similar “qualifying retailers,” which allows eligible retailers to retain and use a portion of their collected state sales tax (equal to the lesser of state net taxable sales or $70,000 for each month in the specified sales tax period).
House Bill 22-1406 makes the special deduction available on sales made in July, August and September 2022 that are reported on the corresponding monthly sales tax returns due in August, September and October 2022. The Colorado Department of Revenue has also issued administrative guidance (Restaurant & Bar Special Sales Tax Deduction Instructions) with detailed information about the special deduction and filing instructions.
Importantly, this opportunity is not limited to restaurant companies that operate solely in Colorado. Multi-state restaurant groups with Colorado locations are encouraged to take advantage of the tax savings outlined below.
Highlights and eligibility
Eligible "Qualifying Retailers" include:
- Alcoholic beverage drinking places (bars, taverns, etc.).
- Restaurants and other eating places.
- Hotel-operated restaurants, bars. and catering services.
- Food services contractors, mobile food vendors and caterers.
Retailers eligible for the deduction are required follow three steps. They must collect all state and state-administered local sales taxes, file timely returns, and remit all local sales taxes, as well as state sales taxes in excess of the special deduction amount. (Note: The special deduction does not apply to any taxes imposed by any state-administered city, county or special district.)
Additional requirements apply under which retailers must:
- Make sales to customers at one or more permanent places of business in Colorado.
- Be scheduled to file sales tax returns on a monthly basis.
- Make taxable sales during the period for which the special deduction is claimed.
- File a return and pay all state-administered local sales taxes on time (i.e., on or before the statutory due date).
- Report the special deduction, in accordance with Department of Revenue instructions, on a timely filed return, and pay any remaining state sales taxes due on time.
The special deduction is available for no more than five physical reporting sites. A physical reporting site is used to report over-the-counter sales made at a permanent place of business in Colorado. Retailers may not deduct taxes collected on delivery sales, which are reported using non-physical reporting sites covering an entire taxing area. Retailers with five or fewer physical sites should repeat the Department of Revenue instructions for each site. Retailers with more than five physical sites may claim the special deduction for any five physical sites.
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