Colorado Sales Tax Filing: Mistakes to Avoid

Atlas Team
7 days ago
2 min read

Filing sales tax in Colorado? Take a deep breath. You’ve got this.

That said…Colorado’s sales tax system can feel like trying to solve a puzzle with pieces from three different boxes. Between state, city, and special district taxes, it’s easy to make a misstep. And those “oops” moments? They can cost you time, money, and a lot of stress.

Let’s make it easier. Here are the most common mistakes Colorado business owners make when filing sales tax, and how to avoid them.

1. Missing the Local Tax Maze

Colorado is a “home rule” state, meaning many cities (like Denver, Boulder, and Colorado Springs) collect their own sales taxes separately from the state.

If you’re only filing with the Colorado Department of Revenue (CDOR) but not with local jurisdictions, you could be leaving big gaps in your compliance.

What to do:

Check if the cities you sell in are home rule municipalities.
If they are, you may need to register and file separately for each one.
As of now, there are 100+ home rule cities in Colorado. Examples include Denver, Englewood, Aurora, and Colorado Springs.

2. Using the Wrong Filing Frequency

Your filing frequency (monthly, quarterly, or annually) depends on how much sales tax you collect. But it can change over time.

If your revenue goes up or down, the state or city may move you to a new schedule. Miss the notice? You might miss a deadline without realizing it.

What to do:

Watch for notices from the CDOR and local tax offices.
Log into your sales tax account at least twice a year for each municipality to confirm your filing frequency.

3. Not Filing at All (Even If You Made No Sales)

Made zero taxable sales? You still have to file a zero return. Skipping it can lead to penalties, even when you don’t owe a dime.

What to do:

Add all filing deadlines to your calendar.
Even for zero returns, submit by the 15th of the month for a buffer before the usual 20th deadline.

4. Misclassifying Products or Services

Not everything is taxed the same in Colorado.

Physical goods are usually taxable.
Digital products and services might be exempt depending on how and where they’re sold or accessed.

What to do:

Double-check the taxability of each item you sell.
Use CDOR’s tax guides or consult a Colorado sales tax pro.

5. Forgetting to Collect the Right Tax at the Point of Sale

If you sell online, at events, or across city lines, it’s easy to under-collect or use the wrong rate.

What to do:

Use Colorado’s online tax rate lookup tool to get the correct rate for the buyer’s address.
Consider a POS system that updates rates automatically—it’s worth it.

Quick Tips to Stay on Track

Set reminders for every filing deadline. Use software that handles multi-jurisdiction sales tax. Check for annual tax law changes. Call a pro when things get complicated.

Bottom Line

Sales tax filing in Colorado isn’t always simple, but it doesn’t have to be scary. By avoiding these common mistakes and staying organized, you’ll keep both the state and those home rule cities happy—and your business running smoothly.

Need help untangling your tax setup? Let’s chat! Schedule a quick call and we’ll make a plan that actually makes sense.