Is Shipping Taxable in Colorado? Colorado Sales Tax Rules for Delivery and Freight Charges
In Colorado, delivery and freight charges are generally not subject to sales tax when they are separable from the purchase and separately stated on the customer invoice. This article explains Colorado shipping sales tax rules, including when shipping is non-taxable, when it may become taxable, and what ecommerce sellers should document for compliance.
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Is Shipping Taxable in Colorado?
For ecommerce sellers, one of the most common sales tax questions is whether shipping, delivery, or freight charges should be taxed. In Colorado, the general rule is relatively seller-friendly: delivery and freight charges are generally not subject to sales tax if they are separable from the purchase and separately stated on the customer invoice.
According to the Colorado Department of Revenue’s Sales & Use Tax FAQ, delivery and freight charges are generally non-taxable when both of these conditions are met. Source: Colorado Department of Revenue, Sales & Use Tax FAQ https://tax.colorado.gov/sales-use-tax-FAQ
When Are Shipping Charges Non-Taxable in Colorado?
Shipping, delivery, and freight charges are generally treated as non-taxable in Colorado when the following conditions are satisfied.
1. The charge is separable from the purchase
A delivery or freight charge is considered separable when the service is performed after the property is offered for sale. In practical terms, the customer should have the option to use the seller’s transportation service, use an alternative transportation service, or pick up the property from the seller’s location.
This means the shipping service should not be treated as an inseparable part of the sale itself. If the buyer has a genuine transportation choice, the charge is more likely to qualify as a separable, non-taxable delivery charge.
2. The charge is separately stated on the invoice
The second requirement is that the shipping or freight charge must be separately stated on the customer invoice. Sellers should clearly show the product price and the shipping charge as separate line items.
For example:
Product price: $100 Shipping charge: $8 Total: $108
If the delivery charge is separately stated and the charge is separable from the purchase, the $8 shipping charge is generally not subject to Colorado sales tax.
What About Shipping Charges on Tax-Exempt Sales?
Colorado’s FAQ also explains that taxable delivery and freight charges related to tax-exempt sales are not subject to sales tax because the delivery charges are considered part of the exempt sale.
This may apply when:
- the item sold is tax-exempt;
- the purchaser is a tax-exempt charity;
- the item is shipped out of state;
- the transaction otherwise qualifies as an exempt sale.
In other words, if the underlying sale is exempt from Colorado sales tax, the related delivery or freight charge will generally follow the tax treatment of that exempt sale.
Common Compliance Issues for Ecommerce Sellers
Combining shipping and handling
Sellers should be careful when using combined labels such as “shipping and handling.” In many states, handling charges may be treated differently from pure shipping or freight charges. For Colorado compliance, it is safer to separately identify shipping, delivery, freight, handling, and service-related charges whenever possible.
Failing to separately state shipping
Even if a shipping charge could qualify as non-taxable, failing to separately state it on the invoice may create tax risk. Sellers should make sure that invoices, order confirmations, and checkout summaries clearly show shipping as a separate charge.
Not documenting transportation options
Because Colorado’s rule depends partly on whether the delivery service is separable from the purchase, sellers should consider documenting whether customers have alternative transportation options, such as pickup or third-party shipping.
Practical Tips for Sellers Shipping to Colorado
Sellers should review their ecommerce and sales tax settings carefully. In particular, they should confirm whether Colorado shipping charges are configured as non-taxable only when the required conditions are met. They should also ensure that invoices separately state shipping charges and that exempt sales are properly documented.
For marketplace sellers and direct-to-consumer brands using Shopify, Amazon, Walmart, eBay, or other platforms, the key is consistency. The tax treatment in the platform, the invoice format, and the seller’s records should all support the same position.
Conclusion
In Colorado, shipping, delivery, and freight charges are generally not subject to sales tax when they are separable from the purchase and separately stated on the customer invoice. Delivery charges connected to exempt sales are generally not taxable as well.
For ecommerce sellers, the main compliance challenge is not only knowing the rule, but also applying it correctly in invoices, checkout settings, exemption records, and marketplace tax configurations.
Source: Colorado Department of Revenue, Sales & Use Tax FAQ https://tax.colorado.gov/sales-use-tax-FAQ