Colorado eliminates state sales tax service fee in 2026

What changed

• Previous rule: Colorado used to allow sellers to keep 2.22% of the state sales tax they collected, capped at $1,000 per filing period, as compensation for compliance. This was called the “sales tax service fee” or “vendor’s fee”.
• New rule: Colorado has removed the state-level service fee altogether.
• Effective date: January 1, 2026

This change applies only to the state portion of Colorado sales tax. Local service fees offered by cities, counties, or special districts are unaffected.

Why this matters for sellers

This change does not increase customer-facing tax rates and does not change how tax is calculated at checkout.

However, it does reduce what sellers keep after remittance.

If nothing else changes in your business:

• You collect the same tax
• You charge customers the same amount
• You remit more to the state than you did previously

Simple example

• 2025:
  • Collect $10,000 in Colorado state sales tax
  • Keep up to $222 as a service fee
  • Remit ~$9,778
• 2026:
  • Collect $10,000
  • Remit the full $10,000

Same sales. Same tax. Lower net retention.

Who this affects

• Sellers collecting Colorado state sales tax
• Remote sellers shipping taxable goods into Colorado
• Finance and accounting teams reconciling net tax remittances

If you use TaxCloud: TaxCloud reflects Colorado’s removal of the state sales tax service fee automatically, so reported remittance amounts match current state rules without manual adjustment.