Key takeaways
- From January 1, 2027, Colorado generally taxes computer software, including SaaS delivered by remote access, under HB26-1223.
- Only software under an individually negotiated, signed license or custom software for a particular user stays exempt.
- Before 2027, SaaS was generally not taxable at state level, but Denver already taxes SaaS under its own rules.
- Foreign sellers must collect once Colorado retail sales exceed $100,000 in the previous or current year; 2026 sales count.
- Register with the Colorado DOR, use SUTS for home-rule cities, and update billing tax codes before January 1, 2027.
In short: Yes, from January 1, 2027. Colorado's HB26-1223 makes computer software generally subject to state sales tax, however it is delivered, including remote access over the internet. That brings most SaaS into scope. Software under an individually negotiated license, or custom-built for one user, stays exempt. Before 2027, SaaS was generally not taxable at state level.
Updated November 2026. We checked the enacted bill, the Colorado Department of Revenue's October 2026 software publication and its sales tax guide in early November 2026.
Is SaaS taxable in Colorado in 2027?
Yes, in most cases. From January 1, 2027, Colorado taxes computer software no matter how it reaches the customer (Colorado DOR, Computer Software).
House Bill 26-1223 was signed by the Governor on June 4, 2026 (Colorado General Assembly, HB26-1223). It rewrites the definition of computer software. Software now counts whether it is delivered by "compact disc, download, or remote access through the internet." The definition also covers apps installed on phones, tablets and other mobile devices (HB26-1223 act text).
The Department of Revenue (DOR) puts it plainly: "Effective January 1, 2027, computer software is generally subject to Colorado and state administered sales and use taxes." It adds that taxability "is determined the same regardless of the means of delivery" (Colorado DOR, SUTT Computer Software, Oct 2026).
The DOR publication does not use the word "SaaS." But remote access through the internet is how SaaS is delivered. So a standard subscription product sold on click-through terms will generally be taxable.
What stays exempt?
Only two kinds of software stay exempt: software governed by a negotiated license agreement, and software developed for use by a particular user (Colorado DOR, SUTT Computer Software, Oct 2026).
The negotiated license test is narrow. The agreement must be individually bargained and signed in writing by authorized people on both sides, before or at the time of access. These do not qualify:
- Click-through, browse-wrap or shrink-wrap terms
- Terms accepted by creating an account
- Standard or boilerplate contracts offered to many customers on a take-it-or-leave-it basis, even if signed
DOR notes that authenticated e-signatures, such as DocuSign, may count as signatures (Colorado DOR, Computer Software). Software built for one specific customer (custom software) is also exempt. The act does not define "particular user," so expect more detail in DOR rules.
Was SaaS taxable in Colorado before 2027?
Not at state level. Until December 31, 2026, Colorado taxes software only if it is prepackaged, sold under a tear-open nonnegotiable license, and delivered on a tangible medium (Colorado DOR, SUTT Computer Software, Oct 2026).
DOR lists hosted software (the "application service provider" model) and electronic delivery as nontaxable under the current rules. That is why most SaaS has been outside state tax.
Some home-rule cities are different. Denver collects its own tax and lists "software as a service" among taxable services sold to Denver customers. Denver's general sales and use tax rate is 5.15% (City and County of Denver, Business Tax FAQ). So "is SaaS taxable in Denver, Colorado?" already has a yes answer under city rules, separate from the state change.
| Item | Before January 1, 2027 | From January 1, 2027 (state level) |
|---|---|---|
| SaaS / remote access software | Generally not taxable | Generally taxable |
| Downloaded prewritten software | Not taxable | Generally taxable |
| Prewritten software on disc or other tangible media | Taxable (tear-open nonnegotiable license) | Generally taxable |
| Mobile apps | Generally not taxable if downloaded | Treated as computer software, generally taxable |
| Software under an individually negotiated, signed license | Not taxable | Exempt |
| Custom software developed for a particular user | Not taxable | Exempt |
| State sales tax rate | 2.9% | 2.9%, plus state-administered local taxes |
Sources: (Colorado DOR, SUTT Computer Software, Oct 2026) (Colorado DOR, Sales Tax Guide)
Does a foreign SaaS company have to collect Colorado sales tax?
Yes, if its Colorado sales cross the economic nexus threshold. Physical presence is not needed. A UK or EU company is treated the same as a seller based in another US state.
Colorado's rule for retailers with no Colorado location works like this (Colorado DOR, Sales Tax Guide):
- Previous year: If your Colorado retail sales were over $100,000 in the prior calendar year, you must get a license and collect.
- Current year: If you cross $100,000 during the year, you must start collecting on the first day of the first month that begins at least 90 days later. DOR's example: cross on June 15, start on October 1.
- What counts: All retail sales into Colorado count, taxable or not.
This matters for 2027. Your 2026 SaaS sales into Colorado were mostly not taxable. But they still count toward the $100,000 test. A company over the threshold in 2026 may need to collect from January 1, 2027. Sellers at or under the threshold must notify Colorado buyers of their use tax duty instead (Colorado DOR, Out-of-State Businesses).
Colorado uses destination sourcing. Sales are generally sourced to where the buyer takes possession (Colorado DOR, Sales Tax Guide). For SaaS, that usually means the customer's location. Note that the US has no federal sales tax, so each state sets its own rules. Our guide to US sales tax for foreign sellers explains the wider picture.
| Nexus and registration fact | Colorado rule |
|---|---|
| Economic nexus threshold | Over $100,000 of Colorado retail sales, previous or current calendar year |
| Start date after crossing mid-year | First day of the first month at least 90 days later |
| License fee | $16 (prorated), plus a $50 refundable deposit |
| License term | Expires December 31 of odd-numbered years |
| Default filing frequency | Monthly; quarterly if average monthly tax is over $50 and under $1,100; annual if $50 or less |
| Due date | 20th of the month after the period |
| Electronic filing | Required for 2027 periods if prior-year gross sales were $50,000 or more |
| Marketplace sales | Sellers selling only through a marketplace that collects all applicable taxes may be exempt from licensing |
Source: (Colorado DOR, Sales Tax Guide)
How do home-rule cities like Denver fit in?
A state license covers only state and state-collected local taxes. Self-collecting home-rule cities set their own rules and licensing (Colorado DOR, How to Apply for a License).
About 66 home-rule cities collect their own sales tax. DOR runs the Sales and Use Tax System (SUTS), a single portal where retailers can register and file one return and one payment for state-administered jurisdictions and all but two self-collecting home-rule cities (Colorado DOR, SUTS Functionality Study). Help and sign-up videos are on DOR's SUTS page (Colorado DOR, SUTS Help). DOR's rate publication DR 1002 shows which cities are home-rule (Colorado DOR, DR 1002).
The state change does not set home-rule city rules. A city may tax SaaS when the state does not, or the reverse. Check each city where you have customers.
Is Colorado writing new software rules?
Yes. DOR has started rulemaking on the HB26-1223 changes and held a public work group on August 18, 2026 (Colorado DOR, Workgroup Meeting).
Open questions include how the negotiated license exemption applies to SaaS contracts and what counts as software for a particular user. Watch DOR's news page for draft rules before January 2027. Bundles of software and services and multi-state users may also need care.
What else changes on January 1, 2027?
California also starts taxing digital products, including prewritten SaaS, on January 1, 2027. Senate Bill 122 was signed on June 29, 2026 (CDTFA, Notice L-1036).
If you sell software across the US, review both states together. Our guide to sales tax on SaaS covers how other states treat it, and economic nexus by state lists thresholds.
What should foreign SaaS sellers do before January 1, 2027?
Start now. Registration, billing changes and customer data all take time.
- Check nexus. Add up all your Colorado sales for 2026 and so far in the year. If you are over $100,000, plan to collect from January 1, 2027.
- Classify your products. Mark which offerings are standard SaaS or downloads (generally taxable) and which use negotiated, signed licenses or custom builds (may be exempt). Keep the signed contracts.
- Register with DOR. Apply for a Colorado sales tax license before you start collecting (Colorado DOR, How to Apply for a License). Remember the $50 deposit.
- Handle home-rule cities. Use SUTS to register and file for self-collecting cities, and check city licensing rules. Denver already taxes SaaS.
- Update your billing system. Set the right tax codes for Colorado, and capture the customer's service address so tax is calculated by location.
- Collect exemption documents. Some customers, such as qualifying exempt organizations, may not owe tax. Keep their exemption paperwork on file.
- Plan filing. Expect monthly returns at first, due on the 20th. File electronically.
If you sell into many states, see how to automate US sales tax filing in every state.
Sources
- Colorado General Assembly, HB26-1223 bill page
- HB26-1223 act text
- Colorado DOR, Sales and Use Tax Topics: Computer Software
- Colorado DOR, SUTT Computer Software (October 2026)
- Colorado DOR, Colorado Sales Tax Guide (May 2026)
- Colorado DOR, Out-of-State Businesses
- Colorado DOR, How to Apply for a Colorado Sales Tax License
- Colorado DOR, Workgroup Meeting Rescheduled: Computer Software
- Colorado DOR, SUTS Help
- Colorado DOR, SUTS Functionality Study (October 2025)
- Colorado DOR, DR 1002 Sales/Use Tax Rates
- City and County of Denver, Business Tax FAQ
- California CDTFA, Notice L-1036
How Taxually handles this
LumaTax is Taxually's US and Canadian sales tax platform. It offers nexus analysis, state registration, multi-state return preparation, filing and remittance. It is currently available to enterprises and to service providers such as accounting firms; e-commerce sellers can join the waiting list.
Related guides:
Frequently asked questions
Is SaaS taxable in Colorado?
From January 1, 2027, yes in most cases. HB26-1223 makes computer software generally taxable at state level regardless of delivery method, including remote access over the internet. Before 2027, SaaS was generally not taxable at state level.
Is SaaS taxable in Denver, Colorado?
Yes. Denver is a home-rule city that collects its own tax and lists software as a service as taxable. Its general sales and use tax rate is 5.15%.
What software stays exempt in Colorado after 2027?
Software governed by an individually negotiated license signed by both parties, and software developed for use by a particular user. Click-through and standard form terms do not qualify.
Do foreign companies need to collect Colorado sales tax?
Yes, if their Colorado retail sales exceed $100,000 in the previous or current calendar year. Physical presence is not required, and all retail sales count toward the threshold.
Do 2026 SaaS sales count toward Colorado's threshold?
Yes. All retail sales into Colorado count, whether taxable or not. A seller over $100,000 in 2026 may need to collect from January 1, 2027.
What is the Colorado state sales tax rate?
The state rate is 2.9%. State-administered local taxes and home-rule city taxes are added on top, depending on the customer's location.
Does California also tax SaaS from 2027?
Yes. Under Senate Bill 122, California taxes digital products, including prewritten SaaS, from January 1, 2027.
