Colorado implemented a $0.27 Retail Delivery Fee (RDF) effective July 1, 2022, applicable to deliveries by motor vehicle containing taxable items shipped to Colorado addresses. Retailers must collect this fee, report it separately from sales tax on form DR 1876, and remit it quarterly to the Colorado Department of Revenue.
Initial Implementation Challenges:
Merchants needed the fee displayed as a separate line item on customer invoices/receipts
Shopify initially lacked native functionality, suggesting workarounds like incorporating the fee into shipping rates
These workarounds created issues: couldn’t accommodate free shipping promotions, didn’t properly exclude tax-exempt orders, and failed to meet the separate line item requirement
Shopify’s Solution:
By July 1, 2022, Shopify rolled out automatic RDF collection for Colorado merchants. The fee appears as a tax line item in the backend (viewable via “Show tax rates” in order details) and is included in total tax calculations. However, it doesn’t display as a distinct “Retail Delivery Fee” line on customer-facing invoices by default.
Ongoing Issues:
The fee incorrectly applies to in-store pickup orders (which should be exempt)
Some municipalities like Aurora assess local sales tax on the RDF itself
Merchants using legacy tax systems must upgrade to the registration-based system for proper collection
Small Business Exemption (2023 Update):
Senate Bill 23-143 exempted businesses with ≤$500k in prior calendar year retail sales from collecting the RDF for 2022-2023. Merchants need guidance on how Shopify will accommodate this threshold and disable the fee for qualifying businesses.
Summarized with AI on November 15.
AI used: claude-sonnet-4-5-20250929.
Hello - can you tell me how to add a Retail Delivery Fee to any order placed in Colorado?
Effective July 1, 2022, Colorado will impose a retail delivery fee on all deliveries by motor vehicle to a location in Colorado with at least one item of tangible personal property subject to state sales or use tax. More info here:
Applies to all retail sales delivered by a motor vehicle to a location in Colorado
Includes third-party deliveries
$0.27 per retail sale for delivery
Charged to the purchaser
Collected by the retailer and remitted to CDOR
Follows sales tax filing frequencies and due dates
Filed on a separate return, form DR 1786
Meaning any online sales made in Colorado (where my business is located), I will need to charge a retail delivery fee of $0.27 per order. I will need to file RDF return and remit fees every quarter (same as our Colorado sales tax). I will need this to show as a separate line item at checkout (after taxes) so I can report these to the Colorado Department of Revenue.
Okay Shopify! All your Colorado vendors will need your help here. We will need a separate line item for each order with a CO shipping address starting July 1.
I also received this email from the state of Colorado this morning. Unless Shopify figures out an easy way to do this, I think we’ll have to create a new shipping profile just for Colorado customers which calls out the $0.27 fee in the name of the shipping profile so it shows up on their receipt, then manually figuring out the rates for each weight and dimension class. It’s a horribly manual hack. Knowing Shopify, they won’t do anything and will wait for a 3rd party plugin to be developed that charges you $100/month to add some stupid text to the checkout screen and receipt.
What’s not clear for me, is the charge only applied to orders when the customer resides and the delivery takes place in Colorado, or is it charged to every order? I’m located in Colorado too but hardly any of my sales take place in Colorado, so I just want to make sure the fee gets charged to the correct customers.
It is a tax on Coloradans collectable by the companies who ship to them and also reside in Colorado. We’re located in Boulder and any shipment we make to a CO address we will need to collect this in addition to the sales tax we already have to collect from them. If we ship to California, we do not need to collect this extra fee.
Here is the response I got back from Shopify Support:
"I was able to check in with our internal Tax Support team for further clarification on this. They were able to look into this further and check in with our Developers as well. They have confirmed that because we currently don’t have the functionality to determine the type of vehicle that is being used for delivery, we would not be able to automatically charge the Retail Delivery Fee on orders.
As a workaround, you can set up Colorado specific shipping rates that include this fee. If you need to have this presented on the checkout screen, you can indicate in the shipping rate name that the shipping rate itself includes the Retail delivery fee. When it comes to adding shipping rates, this is the guide that you can refer to for detailed instructions: Setting up shipping rates · Shopify Help Center."
Really hoping they will add a better solution, but this helps for now. I am wondering if this workaround will be itemized enough for reporting?
We already have shipping rates for Colorado, so unless we can add two rates (one for shipping and one for retail delivery) I’m not sure it will work?
Thanks for this info. We’re hoping Shopify allows a separate fee line as well, it’s a little ridiculous that there is not optimization for a customized separate fee line already.
Suggesting a janky work around that doesn’t work in a lot of common situations? Exactly the kind of response I’ve come to expect from Shopify support. As was said above: someone will likely soon launch an expensive app that will do Shopify’s work for them.
I think our best hope is that Shopify sees this as a tax, which it seems like to me. From Shopify’s support: “Our tax team updates our tax tables on a monthly basis, so if this new tax rate would be something that is required to update on our end, then we would do the update.”
This solution may suffice in the short term - indeed it’s the only solution available at the moment. But it has two major problems:
It’s not at all connected to sales tax. Per CO Dept of Revenue, the fee is applicable on "…all deliveries by motor vehicle to a location in Colorado with at least one item of tangible personal property subject to state sales or use tax." (emphasis added) This means that a sales tax-exempt customer should not pay this fee, and puts the merchant at risk if they collect the fee erroneously.
Unless you offer Free Shipping, it does not split the Retail Delivery Fee into its own, separate line item, which is spelled out as a requirement in the law. The best you can do is say “Standard Shipping (includes $0.27 Retail Delivery Fee)…$5.27”
We use a nice little app called Bespoke Shipping that takes care of most state or zip code charges like this. We got it to charge different shipping to AK and HI. It will work for this too. …in case anybody was interested or desparate.
Does Bespoke Shipping allow you to add the RDF as a separate line item on your invoice/receipt? It seems that the requirement is that retailers show the total of the fees ($0.27) on the receipt or invoice as one item labeled “retail delivery fees”.
