What Colorado Sales Tax Refunds Actually Cover
Colorado does not have a general sales tax refund program for individual shoppers. You cannot file a form and get back the sales tax you paid on groceries, clothing, or other purchases during the year. However, Colorado does offer refunds in specific situations: if you overpaid sales tax on a business purchase, if you bought something that turned out to be tax-exempt, or if you paid sales tax on an item you later returned.
The most common refund scenario is a return or exchange. When you return an item to a Colorado retailer, the store should refund the sales tax that was charged. If the store refuses or you bought the item elsewhere, you can request a refund directly from the Colorado Department of Revenue. Business owners may also recover sales tax paid on items later found to be exempt from tax, or on purchases made in error.
Key Takeaways
- Colorado does not refund sales tax paid on regular purchases; refunds only happen when you return an item, overpay on a business purchase, or buy something that qualifies for an exemption.
- Retailers are required to refund sales tax on returned items at the point of sale, so start with the store where you made the purchase.
- If a retailer will not refund sales tax on a return, you can file a claim with the Colorado Department of Revenue, but you will need proof of purchase and the original sales receipt.
- Business owners who paid sales tax on exempt items can request a refund from the Department of Revenue by filing Form DR 0098 within three years of the purchase date.
- The Department of Revenue processes refund requests by mail; there is no online filing system for individual sales tax refunds.
Getting a Refund When You Return an Item
If you return something you bought in Colorado, the retailer must refund the sales tax along with the purchase price. This is the retailer's responsibility, not the state's. Most stores handle this automatically at the register when you process the return. Ask the cashier to confirm that the sales tax is included in your refund, and check your receipt to verify the amount.
If the store refuses to refund the sales tax or claims they cannot, ask to speak with a manager. Colorado law requires the refund. If the manager still refuses, note the store name, location, date, and amount of tax owed. You can then contact the Colorado Department of Revenue to file a complaint and request a refund.
Filing a Sales Tax Refund Claim With the State
To request a refund from the Colorado Department of Revenue, you must submit a written request by mail. The state does not process these claims online or by phone. Send a letter to the Department of Revenue that includes your name, address, phone number, the name and location of the business where you made the purchase, the date of purchase, a description of the item, the amount of sales tax paid, and the reason you believe you are owed a refund.
Attach a copy of your original sales receipt or proof of purchase. If you are claiming a refund because the item was tax-exempt or you were overcharged, include any documentation that supports your claim. Mail your request to the Colorado Department of Revenue, Sales Tax Section, 1881 Pierce Street, Lakewood, CO 80214.
The Department of Revenue will review your claim and respond by mail. Processing time varies, but you should expect a response within 30 to 60 days. If your claim is approved, the state will issue a refund check. If it is denied, the letter will explain why and may include instructions for appealing the decision.
Sales Tax Refunds for Business Purchases
If you own a business and paid sales tax on an item that later turned out to be exempt from tax, or if you were charged sales tax in error, you can request a refund. Examples include purchases of equipment used in manufacturing, certain agricultural supplies, or items resold to customers. You must file within three years of the purchase date.
Use Form DR 0098 (Application for Refund of Sales Tax) to request the refund. The form asks for the date of purchase, the vendor name, a description of the item, the amount of sales tax paid, and the reason the purchase should have been tax-exempt. Attach your original sales receipt and any documentation that proves the item qualifies for an exemption, such as a resale certificate or a letter from the Department of Revenue confirming the exemption status.
Mail the completed form and supporting documents to the Colorado Department of Revenue, Sales Tax Section, at the address listed above. The Department will review your claim and respond by mail. If approved, you will receive a refund check. If denied, you have the right to appeal within 30 days of the denial letter.
What Happens If Your Claim Is Denied
If the Colorado Department of Revenue denies your refund claim, the denial letter will explain the reason. Common reasons include insufficient documentation, a claim filed after the three-year deadline, or a information that the item does not may have access to for a refund under Colorado law.
You have the right to appeal a denial. The appeal letter must be postmarked within 30 days of the denial date and must include new information or documentation that addresses the reason for the denial. Send your appeal to the same address as the original claim. The Department will review the appeal and issue a final decision by mail.
If you disagree with the final decision, you may request a hearing before the Colorado Department of Revenue's Board of Appeals. This process is more formal and may require you to present evidence or testimony. Instructions for requesting a hearing will be included in the final decision letter.
How Long Refunds Take and How You Receive the Money
After the Colorado Department of Revenue approves your refund claim, the state issues a check by mail. There is no direct deposit option for sales tax refunds. The check is mailed to the address you provided on your claim form.
The time between approval and receiving your check varies. Most refunds are mailed within two to four weeks of approval, but processing can take longer if the Department is handling a high volume of claims. Once mailed, allow an additional one to two weeks for the check to arrive, depending on mail delivery in your area.
If you do not receive your refund check within six weeks of approval, contact the Colorado Department of Revenue to confirm the mailing address and request a status update. Keep a copy of your original claim letter and the Department's approval letter for your records.
Frequently Asked Questions
Can I get a refund for sales tax I paid on groceries?
No. Colorado does not offer refunds for sales tax paid on groceries or any other regular purchases. Refunds are only available when you return an item, overpay on a business purchase, or buy something that qualifies for a tax exemption. Groceries themselves are not subject to sales tax in Colorado, so this situation would not arise.
What if I lost my receipt and cannot prove I paid sales tax?
You will need some form of proof to support your refund claim. A receipt is the strongest evidence, but you may also use a credit card or bank statement showing the purchase, a store return confirmation, or a letter from the retailer confirming the sale and the amount of tax charged. Contact the store where you made the purchase and ask if they can look up the transaction using your name and the date.
Do I have to pay taxes on the refund I receive?
No. A sales tax refund is not considered income and does not need to be reported on your federal or state tax return. It is simply a correction of an overpayment or an error.
Can I request a refund over the phone or by email?
No. The Colorado Department of Revenue only accepts refund requests by mail. You cannot file a claim by phone, email, or online. All requests must be submitted in writing with supporting documentation.
What if the retailer charged me sales tax on an item that should have been tax-exempt?
Start by contacting the retailer and asking them to correct the charge. If they refuse or cannot help, file a refund claim with the Colorado Department of Revenue. Include documentation showing that the item qualifies for an exemption, such as a letter from the Department confirming the exemption status or a resale certificate if you are a business owner.