The extension does not work unless there is a space after the : that separates the variable name and the type name.
html = str
html_doc:html = """
<!DOCTYPE html>
"""
html_doc: html = """
<!DOCTYPE html>
"""

I was ready to assume the extension simply didn't work and was about to uninstall it, after already trying restarting vscode and opening and closing the file, but I happened to hit my format shortcut just before giving up on it.