In November of 2024, Colorado created a 6.5% state excise tax to be paid by vendors on the sale of firearms, ammunition, and firearm precursor parts to consumers located in Colorado. The excise tax does not apply to wholesale sales or sales to peace officers, active-duty U.S. military personnel, and law enforcement. The provisions of “Proposition KK” are codified at Colo. Rev. Stat. § 39-37-101, et seq.
Who Does This Apply To?
For the tax Colorado defines a “vendor” as a person or company doing business as an ammunition vendor, firearms dealer, or firearms manufacturer. All Colorado Vendors must register with the Colorado Department of Revenue by April 1, 2025, and file annual registration renewals. Vendors must keep complete and accurate records to determine their correct tax liability, including itemized invoices of all taxable products sold to Colorado consumers.
Vendors that do not have a location in Colorado must register when annual retail sales into the state exceed $20,000. This includes online sales, catalog sales, etc. If sales in Colorado are $20,000 or less for the prior calendar year, the vendor must register by the 1st of the month 90 days after retail sales exceed $20,000 for the calendar year.
Firearm industry vendors must register with the Colorado Department of Revenue by April 1, 2025. Failure to register opens vendors to back payment requirements and potential penalties.
After registration vendors are required to file monthly excise tax returns based on taxable products and submit excise tax payments to the state. The Department plans to issue formal rules but will not have completed that work prior to the April 1st date of enactment.
What Does This Apply To?
Firearms, Ammunition, frames or receivers, fire control components, devices designed to increase a firearm’s rate of fire, concealability, magazine capacity, or destructive capacity, devices designed to increase a firearm’s stability and handling when repeatedly fired; and any machines that manufacture or produce a firearm. Until the State of Colorado issues more exhaustive guidance vendors should evaluate each of their products and determine how they were reasonably designed and intended to be used, and whether that design and intended use qualifies the product as a taxable firearm precursor part.
Please work with your team to understand the registration, legal, and accounting requirements that will be required of your business.
It is critical the industry give input to the Colorado Department of Revenue’s during drafting of their rules. Any person or entity can offer comments and participate in the rulemaking process through written comments and public hearings. The Department’s tax policy rulemaking page can be found here, which includes a sign up for rulemaking notifications, or the Department’s Excise Tax Unit can be contacted by email at: DOR_ExciseTax@state.co.us.
This alert does not constitute and is not intended as legal or tax advice, nor is it intended to provide a definitive categorization of any specific firearm accessory as taxable or not taxable. Please consult with your independent legal counsel on these matters.
