Colorado extends sales tax to SaaS and all software delivery methods

Starting January 1, 2027, Colorado will impose state-level sales tax on computer software, regardless of how it is delivered to the customer. HB26-1223, signed by Colorado Governor Jared Polis on June 4, 2026, repeals the existing software exception and adds "computer software" to the definition of tangible personal property. Under the new law, computer software, whether delivered by disc, download, or remote access over the internet, are taxable as tangible personal property. Mobile apps on phones and tablets are also included. Custom software, defined as software governed by a negotiable license agreement or developed for a specific user, is exempt under the new law. This change applies only at the state level; home-rule jurisdictions that already tax software at the local level are not affected.

The bottom line: If your business operates in Colorado and sells SaaS or any other software into the state, you will need to begin collecting state sales tax on those sales starting January 1, 2027. Review your contracts now to determine whether any of your offerings qualify for any exemptions. Businesses operating in Colorado's home-rule cities should confirm whether local rules already apply to their software sales.