Intermediate Quick Answer
Why does Colorado charge a 7% credit card fee on sales tax payments?
⚡ TL;DR
Colorado's credit card fee (approximately 2–2.5%) is charged by a third-party processor and is avoidable by paying via ACH. Separately, Colorado's vendor fee lets on-time filers keep 4% of the first $100 in state sales tax due plus 2% above that (capped at $1,000). Late filing forfeits the vendor fee entirely for that period.
The credit card fee is real and avoidable (pay by ACH). The vendor fee is a separate concept (money you keep for timely filing) that partially offsets compliance costs.
Key takeaways
- Credit card payment fee: Colorado uses a third-party processor (currently Official Payments / ACI Payments) that charges approximately 2-2.5% on credit card transactions; this is not a state tax, it’s a processor service fee passed to the payer
- How to avoid it: pay by ACH/e-check through Colorado’s Revenue Online system; ACH payments have no service fee and are the standard approach for most sellers
- Colorado vendor fee (separate concept): Colorado allows on-time filers to retain a vendor fee as compensation for the cost of collecting sales tax:
- 4% of the first $100 of state sales tax due per period
- 2% of state sales tax due above $100 per period
- Capped at $1,000 per period
- Vendor fee mechanics: when you file your return, the vendor fee is calculated and deducted from the amount you remit; if you collected $500 in state sales tax, you remit $500 minus the vendor fee
- Late filers lose the vendor fee: the vendor fee only applies if the return is filed and paid on time; a single day late forfeits the vendor fee for that period
- State vs. local: the vendor fee applies to state sales tax; local sales tax collected on the same return may not have the same vendor fee treatment, check Colorado’s instructions for home rule city amounts
- Why sellers are confused: the interplay between the processor fee (a cost) and the vendor fee (an offset) creates apparent contradictions in net remittance math; understanding both separately clarifies the picture
Frequently asked questions
Why does Colorado charge a fee when I pay sales tax by credit card?
Colorado's Department of Revenue uses a third-party payment processor for credit card payments, and that processor charges a service fee (currently around 2-3% of the payment amount). Colorado does not absorb this fee, it's passed to the taxpayer. Sellers who want to avoid the fee can pay by ACH/e-check instead, which has no service charge.
What is Colorado's vendor fee and how does it work?
Colorado allows sellers who file and pay on time to retain a vendor fee as compensation for collecting sales tax. The vendor fee is 4% of the first $100 of tax due per filing period, plus a smaller percentage on amounts above $100. This fee offsets some of the administrative cost of collection. The vendor fee is deducted from the tax you remit, you pay less than the full tax collected. Sellers who file late lose the vendor fee for that period.
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