By Amanda Hardin | Contributor, Rocky Mountain Voice
On Nov. 5, 2024, Colorado voters approved Prop. KK, a ballot measure that introduces a 6.5% excise tax on the sale of firearms, ammunition and specific firearm parts.
This newly approved tax is expected to generate approximately $39 million annually, which will be directed toward supporting public safety initiatives and enhancing mental health services across the state.
The excise tax under Prop. KK applies specifically to licensed firearms dealers, manufacturers and ammunition vendors operating within Colorado. This tax extends to retail sales of firearms, ammunition and firearm precursor parts such as frames, barrels and magazines. However, it does not apply to private sales or transfers between individuals who are not licensed dealers.
“The goal is to generate a steady source of funding for critical services like victim support and mental health without burdening private citizens making occasional firearm transfers,” said Colorado State Sen. Claudia Ramirez, one of the measure’s proponents.
Out-of-state vendors will not be required to collect the new Colorado excise tax unless they have a physical presence or significant business operations within the state. However, Colorado residents purchasing firearms or ammunition from these out-of-state retailers may still be subject to use tax under Colorado’s existing laws. This could potentially complicate tax compliance for individuals who seek to avoid the excise tax by buying out of state.
Legal experts have noted that while Prop. KK targets in-state transactions, Colorado residents should be aware that existing use tax laws could still apply.
“If you’re purchasing from an out-of-state retailer and bringing those items into Colorado, you may still owe taxes,” explained tax attorney Michael Thompson in an interview with Colorado Public Radio. “The state will be enforcing this more strictly as part of the new policy.”
When does the tax take effect?
The newly approved excise tax is set to take effect on April 1, 2025. By that date, affected vendors must register with the Colorado Department of Revenue and prepare to collect the additional 6.5% tax on eligible sales.
The 6.5% excise tax applies to licensed firearms dealers, manufacturers and ammunition vendors operating within Colorado, but not to general sporting goods stores where firearms are a secondary line of business. This distinction means that large retailers like big-box sporting goods chains, where firearms are just one of many product categories, will generally not be required to collect this tax.
However, smaller specialty shops focused primarily on firearms and ammunition sales will be affected. The law is designed to target businesses where firearms and related products constitute a significant portion of their revenue, ensuring that the tax is levied on entities that specialize in these goods.
Local vendors are already bracing for the impact. “We’ll have to adjust our pricing structure to accommodate the new tax,” said Mark Jensen, owner of Denver-based firearms retailer Rocky Mountain Arms. “It’s going to be an additional cost for customers, which might drive them to look for private sales or online out-of-state options.”
What it means for consumers
For customers, this means that buying firearms or ammunition from stores like Bass Pro Shops, Dick’s Sporting Goods or similar retailers may not incur the additional excise tax, as long as these stores remain classified as general sporting goods retailers rather than specialized firearm vendors.
However, purchases from dedicated gun shops or online firearms dealers that have a significant presence in Colorado will be subject to the new tax. Tim Holt, owner of Jerry’s Outdoor Sports, expressed concern that Prop. KK disproportionately affects small, locally owned firearms stores compared to large sporting goods chains.
“The big stores can absorb these fees and restrictions a lot easier. It’s a major hit for us,” he said. Holt notes his fear that consumers may turn to larger retailers to avoid the excise tax, potentially threatening the viability of small businesses like his.
The passage of Prop. KK has led to discussions among consumers about potential ways to minimize their tax burden. Some individuals may consider purchasing from private sellers or out-of-state vendors to avoid the excise tax. However, legal experts caution that doing so might expose buyers to other regulatory pitfalls.
“Even if private sales are exempt from the excise tax, those transactions are still subject to background checks under Colorado law,” said Jennifer Roberts, a firearms policy analyst. “Additionally, consumers should be aware of federal regulations that could apply to out-of-state purchases.”
Existing tax landscape and new burden
Before the implementation of Prop. KK, firearms and ammunition were already subject to Colorado’s state and local sales taxes, along with federal excise taxes of 10% on handguns and 11% on other firearms and ammunition.
This new 6.5% state tax is in addition to those existing taxes, which could raise the total tax burden on firearm-related purchases substantially.
Retailers are concerned about how the new tax might affect consumer behavior.
“This is going to hit both large and small retailers hard,” said John Lewis, a spokesperson for the Colorado Firearms Association. “Adding another layer of taxation on top of the federal excise tax and existing state sales tax could discourage lawful buyers.”
The anticipated $39 million generated annually by Proposition KK will be distributed to a variety of state funds aimed at addressing public safety and mental health needs:
- $30 million to the Colorado Crime Victim Services Fund for crime victim support grants.
- $5 million to the Behavioral and Mental Health Cash Fund, focusing on veterans’ mental health services.
- $3 million to children’s behavioral health crisis response services.
- $1 million to the School Security Disbursement Program for safety enhancements.
These funds are expected to fill gaps left by declining federal contributions, particularly from the Victims of Crime Act (VOCA) fund.
“With VOCA funds dwindling, we needed a sustainable source of funding to continue supporting victims of crime and mental health programs,” said State Rep. Diana Sanchez, who championed the ballot initiative.
Opponents of Prop. KK argue that it unfairly targets firearm owners, pointing out that the burden of this new tax falls disproportionately on law-abiding citizens exercising their 2nd Amendment rights.
“Why are we forcing firearm owners to shoulder the costs of these programs?” asked Todd Watkins, a representative from the Colorado Firearms Business Alliance. “No one has addressed where the lost federal funds have gone, or why taxpayers are now expected to pick up the tab.”
This sentiment reflects growing frustration over the lack of transparency around how previous federal funds were reallocated.
Looking ahead: Policy implications and community impact
The passage of Prop. KK marks a significant shift in Colorado’s approach to funding public safety and mental health initiatives through targeted taxation. However, the impact on small businesses, consumers and the firearms market remains uncertain.
With implementation set for April 2025, vendors and consumers alike will be watching closely to see how this new tax affects their bottom lines. In the meantime, state officials are preparing outreach programs to educate businesses on compliance and help taxpayers understand their obligations.
As these changes unfold, it remains to be seen whether the anticipated benefits in public safety and mental health services will outweigh concerns from the firearms industry and 2nd Amendment advocates.