Effective January 1, 2023, the State of Colorado has mandated a 10-cent fee for each disposable paper and plastic bag used at check-out. See Colorado House Bill HB21-1162.
How do businesses report the bag fee and related sales tax?
- Line 1 Gross Sales and Services: 60% of the total bag fees collected should be included in Gross Sales. By including bag fees in gross sales, the sales tax due on bag fees will auto-calculate on line 5a.
- Line 7 Actual Bag Fees Collected: Enter 60% of the total 10-cent bag fees collected. This line should not include sales tax, as it has already been calculated on line 5a.
- Line 6 Excess Tax Collected: State law only requires a business to collect sales tax on 60% of the total bag fee collected. Businesses may be unable to program their POS systems to collect tax on 60% on a specific item. If the business has collected sales tax on the whole 10 cents, the business is required to remit the excess tax (40%) on Line 6, Excess Tax Collected.
- Reporting Period: Businesses are required to remit quarterly under the new state law. However, the bag fee may be remitted monthly if convenient for your accounting process.
Certain businesses must collect the Disposable Bag Fee if they provide a disposable carryout bag.
A carryout bag is furnished to a customer at a store or retail food establishment at the point of sale to transport or carry purchased items away.
- Store, meaning grocery store, supermarket, convenience store, liquor store, dry cleaner, pharmacy, drug store, clothing store, or another type of retail establishment at which carryout bags are traditionally provided to customers.
Exclusions to Collecting a Disposable Bag Fee:
- Small Store, a store that operates solely in Colorado, has three or fewer locations in the state and is not part of a franchise, corporation, or partnership that has physical locations outside of Colorado
- Bags used to contain or wrap frozen foods, meat, fish, flowers, potted plants, and other items where dampness may be a problem.
- Bags used to contain loose bulk items such as fruit, vegetables, nuts, chocolate, nails, screws, etc.
- Bags used to contain unwrapped prepared foods and bakery goods.
- Bags used to protect items from damage or contamination when placed in a reusable bag.
- Bags used to contain medical prescriptions issued by a pharmacist.
Please review the full text of HB21-1162 for a complete discussion of the requirements and restrictions imposed under the act.
ALERT: Effective January 1, 2024. The State of Colorado will prohibit using disposable plastic bags and Styrofoam.