Colorado Use Tax: What You Need to Know

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What is Colorado use tax?
Consumer use tax must be paid by Colorado businesses (as well as individuals) for purchases that did not include Colorado sales tax or when inventory acquired at wholesale is used by the business, instead of being sold to customers. The state consumer use tax rate is the same as the sales tax rate: 2.9%.
Read more on tax.colorado.gov

Colorado use tax may be familiar to Colorado residents who have made online or out-of-state purchases. But what is it exactly? Use tax is a charge on tangible personal property that was not previously subject to Colorado sales tax at the time of purchase but is used, stored, or eaten in Colorado. This applies to purchases made while traveling outside of Colorado as well as those made from out-of-state merchants who do not charge Colorado sales tax.

In Colorado, the use tax is calculated at the same 2.9% state sales tax rate. Local governments, however, may also levy use tax at their own, potentially different rates. The use tax in Colorado only applies to purchases made for personal use; different tax laws apply to purchases made for business use.

Let’s examine the sales tax rates in two significant Colorado communities in more detail now:

Loveland, Colorado: The city’s current sales tax rate is 3.55%, which includes both the state’s 2.9% sales tax and the city’s 0.65% sales tax. The majority of purchases made inside the city limits, including retail products and services, are subject to this tax. Denver, Colorado: Due to the fact that it changes based on the kind of transaction and the location inside the city, Denver’s sales tax rate is a little more difficult. In Denver, the overall sales tax rate typically runs from 7.65% to 8.81%. This comprises the 2.9% state sales tax, the 0.1% to 1.5% regional transportation tax, and the 3.65% to 4.5% municipal sales tax.

In conclusion, Colorado use tax is a charge on tangible personal property that was not subject to Colorado sales tax at the time of purchase but is used, stored, or consumed in Colorado. Colorado’s use tax is 2.9%, but local governments are free to set their own rates. While the overall sales tax rate in Denver ranges from 7.65% to 8.81%, it is only 3.55% if you live in Loveland. Maintaining compliance with Colorado tax regulations and effectively managing your personal finances depend on your knowledge of these tax rates.

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