Do Wholesalers Pay Sales Tax Colorado?

Wholesalers are companies that buy products in bulk from producers and then resell them in smaller amounts to retailers or to customers directly. Wholesalers must pay sales tax on their purchases in Colorado, just like any other type of company. They can nevertheless use a resale certificate to evade paying sales tax on goods they intend to resell.

Wholesalers must register with the Colorado Department of Revenue in order to obtain a Colorado state tax ID number. This can be done by mailing in a paper application or doing it online through the department’s website. All sales tax returns and other papers pertaining to taxes must include the tax ID number, which is used to identify the business for taxation purposes.

A wholesaler can apply for a resale certificate after they have a tax identification number. If they intend to resale the goods to clients who will be responsible for paying the tax, this certificate enables them to buy items without having to pay sales tax. The distributor must complete the DR 0563 form, which is available on the department’s website, in order to get a resale certificate.

In Colorado, resale certificates do expire. They must be renewed once two years have passed from the date of issuance. To ensure that their certificates are always valid when making tax-exempt purchases, wholesalers must keep track of when their certificates expire.

Retailers can use the Colorado Sales Tax License Verification tool on the department’s website to confirm a Colorado resale certificate. To check if the wholesaler is registered with the state and that their certificate is still valid, they can use this tool and enter the wholesaler’s tax ID number or resale certificate number.

In summary, Colorado wholesalers do have to pay sales tax on their purchases, but they can utilize a resale certificate to exempt themselves from paying tax on goods they intend to resell. Wholesalers must take specific actions to guarantee they are in compliance with state tax rules, including obtaining a Colorado state tax ID number and completing a resale certificate. Using the department’s online verification tool, retailers can confirm the legitimacy of a wholesaler’s resale certificate.