Colorado Resale Certificate: How to Get, Use, and Accept One
Colorado Resale Certificate: How to Get, Use, and Accept One
TL;DR
Colorado eliminated DR 0563. Buyers now use DR 5002 to claim resale for state-administered sales tax.
Buyers may use the MTC resale certificate only if they hold a state-issued sales tax license or exemption certificate. An unlicensed wholesaler can use DR 5002 instead.
Sellers must verify a buyer’s license or certificate at the time of sale and reasonably conclude that the purchase qualifies for resale.
Colorado sales tax licenses expire on December 31 of odd-numbered years. The current expiration date is December 31, 2027.
Sellers must keep resale sales records for three years.
Self-collecting home-rule cities may require different exemption documentation. Check each city’s rules before treating DR 5002 as sufficient.
What counts as Colorado resale documentation
Document | Issued by | What it does | Who can use it |
|---|---|---|---|
Colorado Department of Revenue provides the form, and the buyer completes it. | Declares that a purchase qualifies for resale or another listed exemption. | Buyers purchasing goods for resale, including unlicensed wholesale-only businesses. | |
Multistate Tax Commission provides the form, and the buyer completes it. | Declares a resale purchase for Colorado state-administered tax. | Buyers who hold a state-issued sales tax license or exemption certificate. Colorado does not accept it for taxable services purchased for resale. | |
Colorado sales tax license | Colorado Department of Revenue | Shows that a business holds a Colorado sales tax registration. | Businesses registered to sell taxable goods, and wholesale-only businesses that choose to obtain a wholesale license. |
A Colorado sales tax license proves registration, but it does not declare that a particular purchase qualifies for resale. A buyer must give the seller a completed resale declaration or other information sufficient to support the exemption claim. Sellers can use the license number to check registration when reviewing that claim.
Why DR 0563 no longer works
Colorado eliminated Form DR 0563 under HB 22-1039 and replaced it with Form DR 5002 for wholesale purchases, including resale. If you still have a completed DR 0563, we recommend giving the seller a current DR 5002 instead. Complete the resale portion and give the form to the seller.
Does a Colorado resale certificate cover every city?
No. DR 5002 and Colorado Department of Revenue resale rules apply to state tax and state-administered local taxes. They do not automatically establish a resale exemption in self-collecting home-rule cities.
Self-collecting home-rule cities, such as Denver, Aurora, Boulder, and Colorado Springs, collect their own sales taxes. If a purchase falls under one of those cities’ taxes, buyers should check that city’s exemption rules before claiming resale, and sellers should check its documentation requirements before accepting the claim. A city may require a Standard Municipal Home Rule Affidavit of Exempt Sale rather than relying on DR 5002. The Department of Revenue’s guidance excludes self-collecting home-rule taxes from its resale documentation rules.
How buyers get and use a Colorado resale certificate
Register for a Colorado sales tax license if you sell taxable goods at retail. If you sell only at wholesale, you may apply for a wholesale license using CR 0100. A wholesale-only business without a Colorado license can still use DR 5002 for qualifying purchases, according to the Colorado Department of Revenue’s guidance.
Download DR 5002. On Line 1, enter your legal name, any different trade name, contact details, and applicable license information. For a Colorado license, enter the eight-digit account number, not the 12-digit location ID.
Mark “Purchase for Resale” on Line 2. Describe your ordinary business and the products you sell. Claim resale only for goods you intend to resell unused or unaltered in the ordinary course of that business.
Skip Lines 3 and 4, which cover other exemptions. On Line 5, an authorized person must sign and provide their printed name, title, and date.
Give the completed form to the seller, not the Department of Revenue. One DR 5002 can cover multiple purchases from the same buyer under the same exemption.
If the seller collects tax because the resale claim remains in doubt, keep the receipt. You may seek a Department of Revenue refund using Form DR 0137B.
Pay applicable tax if you take inventory for your own use instead of reselling it. A purchase that does not qualify for the claimed exemption can also leave you liable for interest and penalties.
How sellers accept and verify a resale certificate
Collect a resale claim. Ask the buyer for a completed DR 5002 or another accepted form of documentation. You may instead record the buyer’s name, address, license or certificate number, business, the goods purchased, the sale date and price, and the name on the payment card or check. An MTC resale certificate requires the buyer to hold a state-issued sales tax license or exemption certificate. It cannot support a claim for taxable services purchased for resale.
Verify the license at the time of sale. Under Colorado’s seller rule, you can check the license or certificate number and expiration through Revenue Online’s “Verify a License or Certificate” service. Alternatively, inspect a complete, unexpired physical license and keep a copy. A license proves registration, but the buyer must also claim resale.
Check whether the purchase fits the buyer’s business. A florist buying flowers for resale presents a plausible claim. A florist buying a mattress ordinarily does not. Ask for clarification if the goods do not reasonably fit what the buyer sells.
Collect tax if doubt remains unresolved. Give the buyer a receipt showing the tax collected. The buyer can seek a refund from the Department of Revenue using DR 0137B rather than asking you to accept a claim you cannot support.
Reverify after the license expires. You need not check a repeat customer’s license before every sale while it remains valid, unless you have reason to doubt the claim. Colorado sales tax licenses expire on December 31 of odd-numbered years, with the current cycle ending December 31, 2027. Check again on the first sale after expiration.
Keep the supporting records for three years. Retain the resale documentation, verification evidence, and sales records, including invoices. Your records should let an auditor connect the buyer’s claim to the sale.
Respond if an audit finds inadequate documentation. Colorado allows 120 days to gather sufficient information and may grant another 60 days for good cause. The extra time does not replace the need to collect and review a reasonable resale claim when you make the sale.
Buyer vs. seller checklist
Buyer checklist | Seller checklist |
|---|---|
Register for a Colorado sales tax license, or apply for a wholesale license if you sell only wholesale. | Collect a completed DR 5002 or other accepted resale documentation. |
Enter your 8-digit account number on DR 5002, not your 12-digit location ID. | Verify the license at the time of sale through Revenue Online, or inspect and copy the physical license. |
Mark “Purchase for Resale” and describe your business and the products you sell. | Check whether the goods fit the buyer’s ordinary business. |
Sign and date the declaration. | Collect tax if you cannot resolve a reasonable doubt about the resale claim. |
Give the declaration to the seller, not the Department of Revenue. | Reverify the license for the first sale after it expires. |
If the seller collects tax, consider a refund claim using DR 0137B. | Keep resale documentation and invoices for three years. |
Pay tax if you use inventory yourself instead of reselling it. | If audit records fall short, use the 120-day period to gather them. Good cause may allow 60 more days. |
Common mistakes with Colorado resale certificates
Using DR 0563. Colorado eliminated DR 0563. Buyers claiming resale should use DR 5002 or another accepted form of documentation.
Entering the wrong license number. Line 1 of DR 5002 calls for the eight-digit Colorado account number, not the 12-digit location ID.
Using the MTC certificate without qualifying registration. A buyer needs a state-issued sales tax license or exemption certificate to use the MTC resale certificate. An unlicensed wholesale-only buyer can use DR 5002 instead.
Using the MTC certificate for taxable services. The MTC form does not cover taxable services purchased for resale.
Skipping verification after license expiration. Sellers must verify the license again on the first sale after its expiration.
FAQs
Is DR 0563 still valid? No. Colorado eliminated DR 0563. Buyers claiming resale should use the current DR 5002 or another accepted form of documentation.
Does DR 5002 expire? DR 5002 has no stated expiration date. A Colorado sales tax license does expire, however. Licenses currently run through December 31, 2027, and sellers should verify a license again on the first sale after its expiration.
Can an out-of-state buyer claim resale? Yes. Under Colorado’s seller rule, a seller may accept and retain a copy of the buyer’s home-state resale license, exemption certificate, or other authorized documentation. An eligible buyer may also use DR 5002 or the MTC resale certificate.
Can a wholesale-only business without a Colorado license use these forms? A wholesale-only business may use DR 5002 without a Colorado license. The MTC certificate requires a state-issued sales tax license or exemption certificate, so an unlicensed wholesaler should not use it.
Is Colorado a Streamlined Sales Tax member? No. Do not use a Streamlined Sales Tax certificate as a substitute for Colorado’s accepted resale documentation.
Do home-rule cities follow the same rules? Not necessarily. Colorado’s state resale documentation rules do not automatically govern self-collecting home-rule cities. Check the exemption requirements of each city where the sale is taxed.
Sources and disclaimer
This guide provides general information, not tax advice. Consult the Colorado Department of Revenue and verify the rules of any self-collecting city involved.