Colorado restaurant tax starts with a 2.9% state sales tax on prepared food and drinks, but what a diner actually pays, and what an owner actually collects, is almost always higher once county, city, and special district taxes stack on top. Combined rates run from under 5% to more than 11% depending on where the restaurant sits. Delivery orders, mandatory gratuities, and shopping-center fees can each add their own line.
What a Restaurant Must Charge Sales Tax On
The 2.9% state rate is set by C.R.S. § 39-26-106 and applies to every restaurant transaction statewide.1Colorado Public Law. Colorado Code 39-26-106 – Schedule of Sales Tax Grocery-style food is generally exempt from state sales tax, but prepared food sold by a restaurant is not, whether the customer eats in, carries out, or orders delivery.2Colorado General Assembly. Food for Home Consumption and Retirement Communities Exemptions The test is immediate consumption: hot food, food heated on the premises, and food sold to be eaten there are all taxable.3Cornell Law Institute. Colorado Code 39-26-102(4.5) – Sales and Use Tax Soft drinks and candy are taxable in any setting.
A few common situations have their own rules. Meals given to employees free or at a reduced price are exempt from sales and use tax. A store-issued coupon reduces the taxable amount, so tax applies only to what the customer actually pays. A third-party coupon that the restaurant gets reimbursed for works the opposite way: tax is calculated on the full menu price even though the customer pays less at the counter.4Colorado Department of Revenue. Sales and Use Tax Topics – Dining Establishments
Local, County, and Special District Taxes on Top
County and city sales taxes layer onto the 2.9% state rate. The Department of Revenue collects most of them automatically along with the state tax, so any sale that’s taxable at the state level is also taxable at the state-collected local level.5Colorado Department of Revenue. Local Government Sales Tax Home-rule cities are the exception. They write and enforce their own sales tax codes, and a restaurant inside one usually has to register separately with the city and follow its rules.6Colorado Department of Revenue – Taxation. Sales Tax Guide
Special district taxes add another layer. The Regional Transportation District and the Scientific and Cultural Facilities District are the most common, and both piggyback on the state tax base, so what the state taxes, they tax.7Colorado General Assembly. Local Government Sales and Use Taxes These additions explain how a bill in metro Denver can carry a double-digit combined rate while a rural county sits a few points lower.
Tips, Gratuities, and Mandatory Service Charges
At the state level, tips and gratuities are not subject to Colorado sales tax so long as the full amount goes to the person who provided the service. That holds for cash tips, credit card tips, and even mandatory gratuities on large parties, as long as the restaurant passes the whole charge through to the server or bartender.4Colorado Department of Revenue. Sales and Use Tax Topics – Dining Establishments If the restaurant keeps any part of a mandatory service charge, the retained portion becomes part of the taxable sale.
Home-rule cities can treat this differently. Denver taxes mandatory service charges on food and drink at its 4% city rate even when the entire charge is distributed to the server.8City and County of Denver. Tax Guide Topic No. 55 – Mandatory Service Charges Check local rules before assuming the state treatment applies.
The Retail Delivery Fee
Any restaurant that delivers an order containing tangible personal property owes Colorado’s Retail Delivery Fee. From July 2025 through June 2026, the fee is $0.28 per delivery transaction.9Department of Revenue – Taxation. Retail Delivery Fee Rates It’s a flat per-order charge, not a percentage, and it combines six separate components that fund clean transit, air pollution mitigation, bridge and tunnel projects, and community access programs.
Smaller operators are exempt. Under C.R.S. § 43-4-218, a business with $500,000 or less in Colorado retail sales in the previous calendar year does not have to collect the fee.10Colorado Department of Revenue – Taxation. Retail Delivery Fee Retailers The threshold uses gross sales minus wholesale sales across all Colorado locations. A new business with no prior-year sales is exempt until 90 days after it crosses $500,000 in the current year.
Public Improvement Fees on the Receipt
Some receipts carry a Public Improvement Fee, or PIF. It looks like a tax but isn’t. A PIF is a private contractual charge imposed by the developer or landlord of a commercial property to pay for infrastructure like parking, landscaping, and internal roads inside a shopping complex, and the money goes to the developer rather than any government.11Colorado Department of Revenue. Taxability of Public Improvement Fees Because the PIF is treated as part of the price, sales tax is calculated on the total including the fee. You pay tax on the fee itself.
Supplies the Restaurant Pays Tax On
On the purchasing side, Colorado splits disposable food-service items into essential and nonessential, and the split decides what the restaurant owes sales tax on when it buys supplies.12Colorado Department of Revenue. Taxable and Tax Exempt Sales of Food and Related Items Essential items, which the restaurant can’t transfer the food without, are exempt. Nonessential items are taxable at the 2.9% state rate.
- Taxable (nonessential): utensils, straws, napkins, stirring sticks, serving trays, placemats, grocery bags, cup sleeves, and condiment packets provided separately from the meal.
- Exempt (essential): plates, cups, and bowls used to serve unwrapped food, plus containers the food can’t be handed over without, such as pizza boxes, French fry sleeves, and clamshell containers.
Getting a Sales Tax License
Before collecting any sales tax, a restaurant needs a Colorado Sales Tax License. The application is form CR 0100, filed through the Department of Revenue.13Colorado Department of Revenue – Taxation. CR 0100 – Colorado Sales Tax and Withholding Account Application A new account requires a $50 deposit with the application. The state refunds it automatically once the business has collected and remitted $50 in state sales tax. The deposit applies only to the first location.14Department of Revenue – Taxation. Standard Retail License
Filing Frequency and Deadlines
The Department of Revenue assigns a filing schedule based on how much state sales tax the business collects per month:15Colorado Department of Revenue – Taxation. Pay Sales and Use Tax
- Monthly, when tax liability is $300 or more per month. The return is due by the 20th of the following month. Businesses collecting $75,000 or more per year in state sales tax must pay by electronic funds transfer.
- Quarterly, for businesses collecting between $15 and $300 per month. Returns are due by the 20th of the month after the quarter ends.
- Annually, for businesses collecting $15 or less per month (under $180 per year). The return and payment are due by January 20.
Most restaurants with steady traffic end up on the monthly schedule. The state’s Sales and Use Tax System (SUTS) handles both state-administered and home-rule filings through one portal.16Colorado Department of Revenue – Taxation. Department of Revenue – Taxation
One recent change: Colorado eliminated the sales tax vendor fee as of January 1, 2026. Businesses previously kept a small percentage of collected state sales tax as compensation for administering the collection. That retention is gone, and restaurants must now remit 100% of the state sales tax they collect.
Penalties and Interest for Late Filing
Missing a sales tax deadline triggers both a penalty and interest. For 2026, the Department of Revenue charges interest at a discounted rate of 8% annually if the tax is paid before a notice of deficiency arrives or within 30 days of receiving one. Wait longer and the rate rises to 11%.17Colorado Department of Revenue – Taxation. Tax Topics – Penalties and Interest Late filing also carries an immediate penalty of 5% of the unpaid tax, with another 0.5% for each month or partial month the return stays unfiled, capped at 12%. Repeated failure to file or pay can lead to revocation of the sales tax license, which means the restaurant can’t legally operate until it’s resolved.
Use Tax on Equipment and Out-of-State Purchases
Buying kitchen equipment, furniture, or other tangible property from an out-of-state vendor without paying Colorado sales tax means the restaurant owes consumer use tax instead. The state use tax rate matches the sales tax rate at 2.9% and is calculated the same way.18Colorado Department of Revenue – Taxation. Consumer Use Tax Guide If sales or use tax was paid to another state on the same item, that amount can be credited against what’s owed Colorado.
The Department of Revenue administers state-level use tax and use tax for certain special districts, including the RTD and SCFD. It does not administer city or county use taxes, so a restaurant in a jurisdiction with a local use tax has to register and pay that separately.18Colorado Department of Revenue – Taxation. Consumer Use Tax Guide Use tax is generally due as it accrues rather than at the end of a filing period, which is easy to miss when a large equipment purchase lands mid-quarter.