Colorado State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Colorado, with full citations and the original source on every page.
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Are a sign company's entry towers installed at car dealerships taxed as real-property fixtures, and does lump-sum vs. time-and-material billing change who pays?
If the entry towers are FIXTURES — tangible personal property so affixed to a building that it can't be removed without substantial damage (Reg 39-26-102.15) — then Colorado's CONTRACTOR rules govern,…
Are the various per-record fees a medical-records company charges (copying, retrieval, certification, postage, etc.) subject to Colorado sales tax?
None of them are taxable. The Department ruled that every enumerated fee a medical-records release-of-information company charges — basic, retrieval, certification, photo/per-page, handling, postage, …
For an equipment lease, are the purchase option, insurance premiums, documentation fees, late-payment fees, and reimbursed personal property taxes subject to Colorado sales/use tax?
Mixed, and this amended (2013) letter REVERSED the original 2008 conclusion on late fees. Leases of tangible personal property are taxable (and the purchase-option price—fair-market or nominal—is taxa…
Are Braille devices, electronic magnifiers, adapted phones, and other products that help blind and legally blind people exempt from Colorado sales and use tax?
Probably not exempt, though the Department made no determination. Three Colorado exemptions might seem to apply — optical sales, prosthetic devices, and durable medical equipment — but the optical exe…
Does a full-service truck wash owe Colorado sales tax on the wash, and use tax on the soaps, wax, water, electricity, gas, and equipment it uses?
Likely a non-taxable service — but with use tax on the supplies. A full-service wash where the company's own employees run the equipment is treated as a non-taxable service, not a taxable equipment re…
When a company buys parts out of state, has them assembled in Colorado into a finished unit, and then exports that unit out of the country, must it pay Colorado tax on the parts, or are they exempt wholesale purchases?
The parts are likely exempt as components of a manufactured product, though the Department made no determination. Colorado exempts tangible personal property bought by a manufacturer that becomes an I…
Does an out-of-state company that occasionally sends tutors to teach a corporate training course in Colorado owe Colorado sales tax or income tax?
Generally no sales tax on the teaching itself, but watch the materials and income tax. Colorado treats education and training as nontaxable services, so charges for instruction aren't subject to sales…
Does Colorado sales or use tax apply when a company leases a passenger car for more than 24 months to someone who lives outside Colorado?
Generally no. If the lessee is a Colorado nonresident when the lease is signed and immediately takes the car to another state to register and use it, the lease is exempt from Colorado sales and use ta…
Are welding gases (acetylene, oxygen, argon, CO2) and welding equipment, attachments, and tools exempt from Colorado sales tax when sold to a manufacturer whose welding is part of its manufacturing process?
Mostly taxable, with one exemption. ACETYLENE used in a manufacturing or cutting process is EXEMPT from Colorado state sales tax as an industrial fuel ('gas') because it is an energy source — though s…
Is the product delivered by an Application Service Provider (ASP) — such as an electronic sales-tax-rate lookup accessed over the internet — subject to Colorado sales and use tax?
Generally not taxable software, but the Department didn't decide this specific product. Colorado taxes tangible personal property, and effective July 1, 2012, computer software is taxable only if it i…
When a steel fabricator does internal fabrication work, or buys fabrication services from a third party, are those labor costs subject to Colorado sales and use tax?
It depends on who fabricates, who supplies the materials, and what happens to the goods. Colorado taxes the FULL purchase price of articles made to order, INCLUDING the fabrication labor, even if labo…
Can a manufacturer claim a Colorado sales/use tax exemption on coal and shredded tires that serve as both kiln fuel and as a chemical ingredient in the finished product?
Partly exempt. A manufacturer may exempt the portion of its coal and shredded-tire purchases that becomes a component of its product — silica and alumina from coal ash, and iron from the tires' steel …
Are the components of a leased residential rooftop solar photovoltaic system exempt from Colorado sales and use tax under the renewable-energy components exemption?
Mostly exempt. The components of a leased residential solar photovoltaic system — modules, racks, inverter, wiring — are exempt from Colorado state and state-administered local sales and use tax under…
Are complete-nutrition and specialized nutritional shakes exempt from Colorado sales tax as 'food,' or taxable as dietary supplements?
They're exempt food. Four nutritional shakes — a complete-nutrition shake, a specialized-nutrition shake, a diabetic shake, and a post-workout shake — all qualify as exempt 'food' because each carries…
Is a web-based subscription service for sending, receiving, and tracking large digital files subject to Colorado sales or use tax, or is it a non-taxable service?
It's a non-taxable service. A web-based subscription for sending, receiving, and tracking large digital files is a service — not a rental of software or servers — so it is not subject to Colorado sale…
When a vehicle lease has an end-of-lease 'true-up' payment between the leasing company and the customer, how is Colorado state and local sales/use tax adjusted, refunded, or collected?
Treat the true-up as an adjustment to the earlier lease payments. Because the lease agreement says the payments are only estimates to be finalized when the vehicle is sold at lease-end, the true-up re…
As an out-of-state lessor of equipment used in Colorado, do I collect from lessees both the sales tax I paid when I bought the property and use tax on their lease payments?
No — you choose one method, not both. For a true lease of 36 months or less, the default is the lessor pays sales/use tax up front when it buys the property and does NOT collect tax from lessees (it c…
Does Colorado sales or use tax apply to an advertising agency's separately stated charges for direct-mail materials and mailing fulfillment when the materials are printed in Colorado but mailed to recipients outside the state?
No. An advertising agency's separately stated charge for direct-mail advertising materials — printed in Colorado but mailed to the client's potential customers located outside Colorado — is not subjec…
Is a prescribed, at-home ophthalmic monitoring device — and the monitoring, data-processing, and call-center services that go with it — subject to Colorado sales tax?
No on both. A prescribed ophthalmic device a patient uses at home to monitor for eye disease appears to qualify as exempt durable medical equipment (it withstands repeated use, serves a medical purpos…
Must a printer charge Colorado sales tax to print a bi-weekly newspaper that the owner distributes free to the public?
Yes. A bi-weekly newspaper does not qualify as a tax-exempt 'legal publication' under § 24-70-102 (that exemption is keyed to publishing frequency, such as daily), so it is taxable tangible personal p…
Does a contractor owe Colorado use tax on goods it tests in Colorado before reselling them, and on materials it builds into products it manufactures partly in Colorado and finishes out of state?
No use tax in either case. A contractor that buys computers, performs compliance/acceptance testing on them in Colorado, then resells and delivers them is NOT liable for use tax on that testing—the te…
Does a church's conversion from an unincorporated nonprofit association to a corporation sole create Colorado sales or use tax liability on the personal property it already owns?
No tax. A church's conversion from an unincorporated nonprofit association to a corporation sole does NOT create Colorado sales or use tax liability on the personal property it owns. Even assuming the…
Is a single-use medical catheter exempt from Colorado sales and use tax when the manufacturer sells it to a healthcare provider who uses it on a patient?
Taxable. A single-use catheter that a healthcare provider buys from the manufacturer and uses to treat a patient is NOT exempt from Colorado sales or use tax. The therapeutic-device exemption only app…
Are a supplier's transportation/delivery charges included in Colorado sales or use tax on the goods — and does billing freight on a separate invoice change the answer?
Generally not taxable, and a separate freight invoice is fine. A supplier's transportation charge is excluded from Colorado sales/use tax when it's separable (the buyer could use its own or another ca…
Is an injectable dermal filler used to smooth smile lines exempt from Colorado sales and use tax?
Yes—but on a narrow ground. In this amended letter (which reversed the Department's original 2008 conclusion that the product was taxable), the Department held the injectable dermal filler is EXEMPT b…
Are optional, separately stated charges for a rental car company's prepaid-toll, roadside-assistance, and carbon-offset programs subject to Colorado sales or use tax?
Not taxable. A rental car company's optional, separately stated charges for prepaid-toll, roadside-assistance, and carbon-offset programs are NOT subject to Colorado sales or use tax. Each is a servic…
Are over-the-counter retail sales of propane and firewood subject to Colorado sales and use tax?
Exempt for residential use, but presumed taxable. Propane and firewood sold to residents to heat/power their homes are exempt from Colorado sales/use tax (a non-commercial RV counts as a 'residence').…
Does a retailer owe Colorado use tax when it withdraws items from inventory to assemble and display them before selling, and can it credit that use tax against the tax collected on the later sale?
Usually no use tax on ordinary displays. A retailer that pulls goods from inventory and puts them on display WHILE still holding them out for sale has made only an 'incidental' use and owes no use tax…
When a bank buys equipment-lease contracts from an affiliate that services them, who registers and files Colorado sales tax — the bank or the servicing affiliate?
The bank that owns the leases must register and file in its own name. A taxpayer can hire an agent to handle invoicing and collections, but the duty to register for a Colorado sales/use tax license, f…
Are PDF documents that customers pay for and download from the internet subject to Colorado sales or use tax?
Yes. Colorado defines taxable tangible personal property as 'corporeal' property, and the Department treats electronic data as corporeal—so the sale of documents (such as PDFs) downloaded from the int…
Are custom single-use surgical instruments a manufacturer sells to hospitals and surgery centers subject to Colorado sales or use tax?
Taxable. Custom, single-use surgical instruments a manufacturer sells to hospitals and surgery centers are subject to Colorado sales/use tax. Colorado's medical exemption covers therapeutic devices an…
When a motor-vehicle lessor sells the leased vehicle to the lessee at the end of the lease, who is responsible for collecting Colorado sales or use tax?
The lessor collects the tax. When a motor-vehicle lessor sells the leased vehicle to the lessee at the end of the lease (here, at fair market value), that's a taxable sale and the Company, as seller, …
Are pet microchips, scanners, and ID tags taxable, and how are bundled pet-recovery services and 'free' chips treated under Colorado sales tax?
Goods taxable, services not. Pet microchips, scanners, and ID collar tags are tangible personal property, so their sale is subject to Colorado sales/use tax; no exemption applies (the livestock-drug e…
Is Colorado sales or use tax due when a lessee pays $1 to take title at the end of a Lease Intended as Security (LIS) agreement?
It depends on the structure, and the Department didn't decide. Whether tax is due when a lessee pays $1 to take title at the end of a 'Lease Intended as Security' (LIS) turns on whether the arrangemen…
Are a company's print-and-mail service and its electronic data services (file transfer, address correction, database search) subject to Colorado sales tax?
Mostly non-taxable services, but the Department made no specific determination. A company's electronic data services—automated file transfers (VPN/SSL), USPS address corrections, and database-search/u…
How is Colorado sales and use tax applied when related companies sell building materials to one another, and a contractor installs them into real property?
A contractor is the consumer of building materials it incorporates into real property and pays sales tax when it buys them; the building owner pays no sales or use tax on those materials. A manufactur…
Are a web-hosted exemption-certificate portal and an online sales/use tax-return preparation service subject to Colorado sales or use tax?
Not taxable. Two web-hosted products—an online portal where customers fill out, print, and submit sales-tax exemption certificates, and a service that prepares and files a client's sales/use tax retur…
Is a separately stated fee to read the meter on a customer's propane tank subject to Colorado sales tax?
It depends on the customer, and the Department made no binding determination on separability. A fee to read the meter on a propane tank is NOT taxable when the gas sale itself is exempt—Colorado exemp…
Are an FCC-license fee and a 'coordination fee' that a two-way-radio distributor charges its customers subject to Colorado sales or use tax?
It depends, and the Department made no binding determination. FCC-license and 'coordination' fees a distributor bills along with two-way radios are TAXABLE if either (1) the radio service qualifies as…
Can a corporation or LLC claim Colorado's nonresident temporary-use exemption on an aircraft or vehicle used briefly in Colorado, and can a Colorado resident avoid use tax on an out-of-state vehicle driven into the state?
The nonresident temporary-use exemption (§ 39-26-713(2)(c)) applies only to individuals, not to corporations or LLCs — so an out-of-state corporation's aircraft used in Colorado owes Colorado use tax …
A condo developer paid sales tax when it bought furniture, then sells the furnishings to fractional-interest buyers with the units—does it owe sales tax again on that sale, and is that double taxation?
Yes, the sale to fractional-interest buyers is a taxable retail sale of tangible personal property—even though the developer already paid sales tax when it bought the furniture. The developer is actin…
When a contractor incorporates its own materials into Colorado real property, is the fee paid to a third-party fabricator excluded from the use tax on those materials?
It depends on whether the fabricator also sold the materials. A contractor that buys materials out of state and incorporates them into Colorado real property is the consumer and owes use tax on its ac…
When a company sells taxable equipment below its cost to get customers to sign up for a non-taxable service, is sales tax based on the low price the customer pays or on the company's cost?
On the company's cost, not the low price the customer pays. When a company sells taxable equipment below its acquisition cost as an inducement to buy a non-taxable service, Colorado sales tax is compu…
When a company gives a 'free' satellite-TV receiver as an inducement to subscribe to non-taxable TV service, who owes tax on the equipment — and can the company collect it from the customer?
The company owes use tax. When a provider gives a 'free' or credited satellite receiver as an inducement to sign up for non-taxable TV service, it's using its own inventory for marketing — so it owes …
How does Colorado tax commercial signs and the related charges—installation, removal, crating, freight, city permits, electrical hookup, and subcontracted repairs—on a customer's invoice?
Signs are generally taxable tangible personal property—most commercial signage does NOT lose its identity to become an integral, inseparable part of realty just by being bolted down (Reg (39)26-102.15…
Are the fees a company charges dentists for a turnkey patient-rewards program (including the mailers it sends to patients) subject to Colorado sales or use tax?
The Department gave the framework rather than a firm answer. Colorado taxes tangible personal property and only a limited number of services; when the TRUE OBJECT of a transaction is a service, it isn…
In Colorado, are dietary supplements, TENS units, and 'pads' subject to sales tax, or do they qualify as exempt food or exempt therapeutic devices?
Supplements are generally taxable—dietary supplements like vitamins and minerals are tangible personal property and don't qualify as exempt food (Regulation (39)-26-102.4.5(b)(8)/(9)) or, generally, a…
In Colorado, are restocking fees, passed-through vendor travel/expense charges, on-site training, and equipment rentals subject to sales or use tax?
Four answers. (1) Restocking fees: if a retailer charges one, it gets NO sales-tax refund on the return, because §39-26-102(5) allows the credit only when the FULL purchase price is refunded—a partial…
Are updates to 'canned' software and the support services in an optional maintenance contract taxable in Colorado, when sales tax was already paid on the original software license?
It depends on whether an update merely repairs the existing software or is a new upgrade, and whether the maintenance contract is optional. Bug-fix updates that repair, correct, or maintain the origin…
Does a distance-learning company have to charge Colorado sales tax on the printed course materials (binders) it ships to students, or is it a nontaxable service?
They're taxable. The Department concluded that this distance-learning program is more like a home-study course than a traditional school: the true object of the transaction is the printed materials (t…
When a contractor builds a telecommunications tower attached to a carrier's property, who owes sales/use tax on the materials—and does it change with a lump-sum vs. time-and-material contract?
It depends on whether the tower becomes part of the real property and on the contract type. The general rule: a contractor is the CONSUMER of building materials that lose their identity by becoming an…
Does a company owe sales tax when it has customers' VHS tapes converted to DVD by a third party and hands over the DVD for a fee—and can it buy the conversion from the third party tax-free?
Yes, the sale to the customer is taxable, and the company should buy the conversion tax-free for resale. There are two sales: the third party's sale of the finished DVD to the company is an exempt who…
Does a for-profit daycare pay sales tax on the paper plates, plasticware, and similar supplies it uses to serve food to children?
The daycare pays the tax. A for-profit daycare is a service enterprise and is treated as the consumer of the tangible personal property it uses to run its business—paper plates, plasticware, crayons, …
Does Colorado sales tax apply to a company that only provides labor—merchandising, hanging signage, and assembling fixtures—for retail-store customers who own all the goods?
No. A company that provides only labor—stocking and arranging merchandise, hanging the store's signs, and assembling the store's display fixtures—is performing nontaxable services and owes no Colorado…
Are visco-elastic (memory-foam) mattresses, pillows, and cushions exempt from Colorado sales tax as therapeutic devices if a doctor prescribes them for pain management?
No, not on the facts shown. Visco-elastic memory-foam mattresses, pillows, and cushions don't qualify for Colorado's therapeutic-device exemption even with a doctor's prescription. Tax exemptions are …
Can an automotive-parts wholesaler accept a dealership's resale certificate—especially if it separately invoices the parts department—when some items will be consumed by the dealer and some resold?
Yes, with due diligence. A wholesaler can generally accept a Colorado retailer's sales tax license number as good proof of a wholesale (exempt) sale, and the retailer must make a good-faith estimate o…
Is a surgical laser used to create LASIK flaps, and its single-use interface (a milled glass part, like the blade in the traditional method), exempt from Colorado sales or use tax?
They're taxable. Colorado exempts drugs or materials a doctor furnishes to a patient (plus corrective eyeglasses, contacts, and hearing aids), but the rule turns on whether the item leaves with the pa…
Are external fixators and single-use surgical wire exempt from Colorado tax as therapeutic devices?
External fixators are exempt; the surgical wire is taxable. Colorado exempts therapeutic devices, equipment, and accessories that correct or treat a human physical disability. An adjustable external f…
Is gas, electricity, and water used in manufacturing exempt in Colorado — and how do R&D, packaging, residential use, nursing homes, and restaurants fit?
Electricity and gas (and steam, coal, fuel oil, coke, nuclear fuel, wood) used in manufacturing and industrial processes are exempt from state, special-district, and state-administered local sales/use…
For a commercial furniture dealer, which charges — delivery, installation, reconfiguration, repair, storage, freight-in, design — are subject to Colorado sales tax?
Services a furniture dealer provides are taxable when they're inseparable from the sale of the goods, and nontaxable when they're optional and separately stated. Resales to end users are taxable (resa…
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These are official tax letter rulings and advisory opinions issued by Colorado's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.