The Department of Revenue is responsible for administering the cigarette tax. The tax is imposed on wholesalers, and payment of the tax is evidenced by stamps affixed to cigarette packages or by a metered imprint. Metering machines are inspected, read, and set once a month. At the time of inspection the metering machine is set to a number requested by the wholesaler. The amount of tax is determined based on the setting, less a discount of 4 percent of the face value of the stamps.
Payment is due on or before the tenth day of the month following the month of purchase.
Wholesalers purchasing stamps must pay the tax on or before the due date to receive the 4 percent discount. Cigarettes were subject to the state sales and use tax prior to their exemption in 1959. From 1959 to 1964, there were no state-imposed taxes on cigarettes in Colorado. To qualify for these moneys, local governments are prohibited from imposing fees, licenses, or taxes on any person as a condition for engaging in the sale of cigarettes, and they are prohibited from taxing cigarettes. The funds are distributed to cities and towns in proportion to the amount of state sales tax collected in a jurisdiction relative to all state sales taxes collected.