Adding an Retail Delivery Fee - New Legislation in Colorado

Accounting & Taxes

Topic summary

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.
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Hi everyone!

Are there any issues with the RDF not being itemized as a separate line item on the customer invoice? Also for reporting is it included in the tax rate and not itemized as Retail Delivery Fee? How is everyone working around those issues?

Thanks!