Welcome back to another episode of Gun Industry Insider—today is April 4, 2025. I’m your host, Ray Toofan. Today’s episode is focused on a single important issue that will affect all of us in the firearms industry that sell online. We’re going to dive into the recent Colorado excise tax that is targeted specifically towards firearms retailers which took effect on April 1st. So let’s get started.

Today’s topic is a pretty significant one for all of us who sell firearms and firearm related items online. Colorado’s new 6.5% excise tax on firearms, ammunition, and firearm precursor parts, which went into effect on April 1, adds yet another hurdle for online retailers. This tax, passed through Proposition KK and now part of Colo. Rev. Stat. § 39-37-101, applies to retail sales by vendors—such as ammunition sellers, firearms dealers, or manufacturers—directly to consumers in Colorado. Wholesale sellers, distributors, sales to peace officers, active-duty military, or law enforcement are exempt from this new law. While the state plans to use the revenue for gun-control related programs, the real story is how this tax affects businesses, especially those selling online.

For online retailers, my company included, this isn’t just a small tweak—it’s potentially a major shift. If you’re selling into Colorado and your annual sales there top $20,000, you needed to register with the Colorado Department of Revenue by April 1, 2025, or within 90 days of when you hit the threshold. That applies whether you’re based in Colorado or on the other side of the country. Cross that threshold, and you’re on the hook to collect and remit the tax. Miss the registration or mess up compliance, and you could face back taxes and penalties. 

What’s taxable here goes beyond just guns and ammo. The law includes “firearm precursor parts,” which covers frames, receivers, fire control components, and anything designed to boost a firearm’s rate of fire, concealability, magazine capacity, or firepower. It’s an absurdly wide net, and online retailers now need to dig into their product lists to figure out what’s covered. The state hasn’t provided a detailed rundown yet, and they probably won’t, at least not voluntarily, so there’s guesswork involved. That gray area will spark disagreements down the road about what’s taxable and what isn’t and will likely lead to a lawsuit.

Online businesses that choose to comply, especially the larger online retailers, have to update their systems to calculate and collect this 6.5% tax correctly. That might mean reworking your e-commerce setup if you’re a smaller shop, which isn’t cheap or quick. You also need to keep detailed records—think itemized invoices for every taxable sale—and file monthly excise tax returns. For smaller operations or those running lean, this extra work can pull focus from things like customer support or expanding your business. It’s a lot to handle.

Customers will feel this too, and that’s a big deal for online retailers. A 6.5% price hike on firearms and related gear could push some buyers to hold off or look elsewhere, potentially those smaller online retailers that aren’t complying or don’t need to comply. Online shoppers are already comparing prices across sites, and now they’ve got an extra reason to check out-of-state options too. If you’re a Colorado-based retailer, you might lose business to nearby states like Wyoming or Utah, where this tax doesn’t exist. Customers close to the border could just drive over and skip the extra cost, leaving your sales numbers hurting.

For out-of-state online retailers, the challenges are a bit different but just as real. You’ve got to track your Colorado sales closely to know when you hit that $20,000 mark. Once you do, you have 90 days to register and start collecting and remitting the tax. That means you need solid systems to monitor sales and stay on top of it. Plus, you’re stepping into Colorado’s tax rules, which might not match what you’re used to in your home state. It’s another layer of complexity for businesses already stretched across multiple markets.

Looking ahead, this tax could start a trend with the other liberal states if it doesn’t get challenged and thrown out. If it works for Colorado—meaning it brings in revenue without too much pushback—other states might follow suit. Imagine a handful of liberal states each slapping their own excise taxes on firearms and components. For online retailers, that’s a nightmare of mismatched rules and extra costs. You’d have to adjust your operations state by state, which could splinter the market and make it tougher to keep things efficient.

However, there’s a chance to get ahead of this. The Colorado Department of Revenue is still hashing out the details and wants input. They’re accepting written comments and holding hearings, so firearms businesses can weigh in. This is where online retailers can push for clearer definitions of taxable items, simpler ways to comply, or even carve-outs for certain products. Getting involved now could soften some of the rough edges and make this easier to manage, or possibly eliminate it all together.

So now to the obvious questions which some of you may already be asking. First off, how is Colorado going to know if you sell $20,000 or more into the state? As far as I can tell, Colorado has no way of knowing this since they don’t have access to your financials. The one possible way they might be able to figure this out is if they can force marketplaces, such as GunBroker, to provide them with a list of sellers that have sold over $20,000 into the state. Whether or not GunBroker complies is a different question.

The next question is what about the large marketplaces, such as Amazon and Walmart, that sell these supposed “firearm precursor” parts, whatever those may be. How is Colorado going to filter out those sales, such as red dot optics, along with other items that supposedly fall into this category? Are they going to give the big box retailers an exemption and go after the marketplace sellers? Will the marketplaces stop sales of those parts to Colorado? Who knows what’s going to happen there. 

Another question which some of you are wondering is, how does Colorado plan to enforce this if you’re an out of state seller? If Colorado determines that you’ve sold more than $20,000 in firearm related components, you haven’t registered, you have no plans to, and decide to give them the middle finger, what can they do? For some of us that deal in high end items, $20,000 could be just 3 or 4 sales to customers in the state. 

If your company doesn’t have assets in Colorado to confiscate, it’s not like they can prevent the post office, UPS, or FedEx from delivering your packages to customers or FFLs. And if you’re a seller in a state such as Texas, is Colorado going to somehow force Texas to go after your business for this firearm excise tax? I highly doubt the attorney generals in conservative states are going to listen to the Colorado Department of Revenue and tell them to get lost. They might send intimidating sounding letters to your business, but again, how do they plan to enforce their tax grab? 

This seemingly unconstitutional tax is very similar to the South Dakota vs Wayfair case, which fundamentally changed online sales tax collection with large retailers and marketplaces. Whereas the Wayfair case applied to all sales, and many states followed suit, along with marketplaces complying, the Colorado statute targets just firearm related sales. The Second Amendment Foundation has already filed a lawsuit since this definitely has 2nd amendment and interstate commerce implications. It’s very likely that this tax will make its way to the supreme court if Colorado doesn’t relent.

So if you’re an online retailer hitting that $20,000 threshold, are you going to register? If so, then your systems need to be ready to collect and report the tax, but just on the items that fall into the category. If a single invoice contains items that are taxable and others that aren’t, it can be a mess. You’ll also need to keep an eye on the rulemaking process should the list of items change. Jump in with feedback if you can. Groups like the SAF and NSSF are out there with resources and updates, so leaning on them could save some headaches.

The bottom line is that this 6.5% excise tax is yet another liberal state’s form of gun control, this time focused on online retailers in the firearms world. It piles on costs and compliance work. Understanding what’s coming and taking steps now can help avoid any possible issues down the line.

We’ve covered quite a bit today about the Colorado excise tax. It still remains to be seen how Colorado will implement and enforce this tax and how lawsuits will shape the future of this tax. These developments aren’t just headlines—they could directly impact your shop, your sales, or your bottom line. Got thoughts or ideas for future episodes? Email us at insider@gunindustryinsider.com or hit us up on X at @GunInsider. Stay tuned for our next episode, where we’ll be diving into fresh developments that could affect your business. Thanks for listening. Until next time!