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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If my equipment lease requires me to reimburse the lessor for the personal property tax on the equipment, is that reimbursement subject to Colorado sales tax — even when it's billed separately?
Yes. When a lease requires the lessee to reimburse the lessor for the personal property tax on the leased equipment, that reimbursement is a taxable 'lease payment' and is included in the Colorado sal…
Must a Colorado combined report include both financial-institution and non-financial affiliates, and how is the group's income calculated when the two use different apportionment rules?
Both, by subgroup. A Colorado combined report must include affiliated financial institutions and non-financial corporations that meet the three-of-six combination criteria in § 39-22-303(11)(a) — ther…
On a layaway or partial-payment plan, when is Colorado sales tax due — as each installment is paid, or only when the customer finishes paying and takes the item?
Sales tax is due only at the final payment. Because Colorado taxes a 'sale' — the transfer of title or possession of goods — and on both layaway and partial-payment plans the store keeps title and pos…
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…
When a food-service company prepares patient meals for a for-profit hospital, is sales tax due on the whole charge — including the labor and management fee — or only on the food?
On the whole charge tied to the meals. A food-service company that prepares patient meals for a for-profit hospital is treated as a caterer selling prepared meals, so it must collect Colorado sales ta…
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').…
May a retailer calculate Colorado sales tax by multiplying the sale by the tax rate percentage instead of using sales tax charts?
Yes—compute by percentage. A retailer may (and should) calculate Colorado sales tax by multiplying the taxable sales amount by the tax rate (the state rate is currently 2.9%); the Department does NOT …
Are sales of dietary supplements subject to Colorado sales tax, or do they qualify for the food exemption?
Taxable. Dietary supplements are subject to Colorado sales tax—they don't qualify as exempt 'food.' Colorado exempts food for home consumption only if it meets the federal SNAP/Food Stamp definition (…
Does a 'third-party intermediary' that arranges and marks up repair/maintenance work for retailers have Colorado sales tax liability on its markup?
Undetermined—the Department declined to decide. A company acts as a 'third-party intermediary': retailers call it for repair/maintenance work, it hires a local contractor, pays the contractor (includi…
Does an out-of-state manufacturer that stores inventory in a Colorado warehouse have Colorado income-tax nexus, or is it protected by Public Law 86-272?
Yes — the warehouse creates nexus. Public Law 86-272 only shields a company whose Colorado activity is mere solicitation of orders shipped from outside the state. Maintaining a warehouse and inventory…
Is Voice over Internet Protocol (VoIP) phone service subject to Colorado sales tax?
Yes. Colorado taxes intrastate telephone/telecommunications services, and the Department treats VoIP as functionally the same as traditional telephone service—so charges for VoIP are subject to sales …
Does an out-of-state insurer with a Colorado insurance license — but no Colorado employees — have Colorado income-tax nexus?
Possibly. The Department wouldn't decide nexus in a General Information Letter, but it observed that merely registering with the secretary of state does not create income-tax nexus, while holding a li…
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…
Are a seller's charges for installation, troubleshooting, removal, reinstallation, and trip fees on equipment subject to Colorado sales tax?
It depends on how the labor is sold. Charges for services are generally not subject to Colorado sales tax, but a charge for maintenance or a service warranty made in connection with the sale or lease …
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…
Does a company that sells and installs a factory-built (modular) home in Colorado owe sales tax, and is any part of the price exempt?
Yes, but only on part of the price. A modular or other factory-built home is taxable tangible personal property, and the seller must collect Colorado sales tax from the buyer—but 48% of the purchase p…
If my business has Colorado nexus but no sales tax to report for a period, do I still have to register and file a Colorado sales tax return?
Yes. Once a retailer is required to hold a Colorado sales tax license, it must file a sales tax return for every reporting period—even one with no tax due—using the Department's free 'zero file' optio…
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…
Is short-term lodging furnished to an out-of-state church youth group on a ski trip exempt from Colorado sales tax as a sale to a charitable organization?
Taxable. Short-term lodging (under 30 days) furnished to an out-of-state church youth group on a ski trip is subject to Colorado sales tax. Colorado taxes room accommodations rented for fewer than 30 …
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…
How does a prepaid debit card company apportion its Colorado income from card sales and transaction fees — by cost of performance or by market?
By market, not cost of performance. The Department ruled that a prepaid/debit card company qualifies as a 'financial institution' because it earns more than 50% of its income from activities a financi…
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…
Will an out-of-state company owe Colorado corporate income tax if it lets one overhead employee work from a home office in Colorado, even though he generates no revenue?
Likely yes. A company with an employee residing and working in Colorado will generally have nexus for Colorado income tax — even if that employee is purely overhead and generates no revenue. Service i…
Are retail sales of enteral feeding pumps subject to Colorado sales tax?
Taxable. Retail sales of enteral feeding pumps are subject to Colorado sales tax. Colorado taxes retail sales of tangible personal property, and while several medical-equipment exemptions exist, the D…
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…
Are specialty therapy mattresses (low-air-loss, pressure-relieving, turning, bariatric), HI/LOW and bariatric bed frames, and wheelchairs subject to Colorado sales tax?
It depends on the item. Colorado taxes tangible personal property, but the medical exemption specifically covers wheelchairs and hospital beds. Therapeutic devices, appliances, and related accessories…
Are medical diagnostic test kits—a flu A+B test, an RSV test, and an hCG urine test—subject to Colorado sales or use tax?
The Department gave the framework, not a firm answer. Colorado taxes tangible personal property unless exempt (§39-26-104), and several medical exemptions can apply to diagnostic products—prescription…
Is an insurance company exempt from Colorado corporate income tax because it is 'subject to' the gross premium tax, even though all of its premiums are exempt from that tax?
Yes, exempt. The company is an insurance company that falls within Colorado's gross premium tax statute, so it is 'subject to' that tax and therefore exempt from Colorado corporate income tax — even t…
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 …
Do nonresident directors of a nonresident corporation owe Colorado income tax on their director pay because they held one board meeting in Colorado?
Yes, on a day-apportioned share. Nonresident directors who attend a board meeting in Colorado are carrying on their occupation in Colorado, so that income is Colorado-source. The Colorado portion is t…
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 orthopedic implants (screws and plates made in standard sizes, not fitted to one person) exempt from Colorado sales tax, even if they don't meet the 'prosthetic device' definition?
They may well be exempt, but through a different door than the company assumed. Rather than fighting over whether standard-size screws and plates are 'prosthetic devices' (which FYI Sales 68 defines a…
When a printer in one Colorado city prints marketing material and either ships it to a direct-mail company or mails it to recipients, whose local sales tax applies?
It depends on where the printed material is delivered, and many of the relevant taxes are home-rule taxes the Department doesn't administer. For the state-administered county taxes, a retailer that de…
In Colorado, are food supplements (vitamins, minerals), therapeutic medicines, and toiletries like soap and deodorant exempt from sales tax as 'food'?
Most of them are taxable. Colorado exempts 'food' (tied to the federal food stamp definition, 7 U.S.C. §2012(g)), but food supplements and deficiency correctors—vitamins, minerals, cod liver oil, and …
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…
When a customer applies a $40 federal NTIA coupon toward a TV converter box, does Colorado sales tax apply to the full price or the reduced price the customer pays?
Tax applies to the full price. Under the federal NTIA program a household gets coupons worth up to $40 each toward a TV converter box, so a $59.99 box costs the customer $19.99—but Colorado sales tax …
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 optional, separately stated clothing alterations (hemming, shortening, taking in) ordered at the time you buy the garment subject to Colorado sales tax?
No. Optional, separately stated alteration services—shortening, hemming, taking in—that a customer orders from the retailer at the time of buying the clothing are NOT subject to Colorado sales or use …
When a customer uses a $40 federal government coupon toward a converter box, is Colorado sales tax computed on the full price or on the reduced price the customer actually pays?
Tax is computed on the full price, not the discounted price. A $40 federal coupon used toward a $49.99 converter box means the customer pays $9.99, but Colorado sales tax still applies to the full $49…
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…
When a customer returns goods in a later quarter and the retailer refunds the price plus the sales tax, how does the retailer recover that overpaid sales tax on its Colorado return?
Report the refunded gross sales on Line 3C ('Overpayment from previous return') of the Colorado sales tax return (Form DR 0100). Subtract it from net sales on Line 3 to get taxable sales on Line 4—but…
When a direct-sales company gives a party hostess 'hostess dollars' to apply against her purchases, and charges separately stated shipping, are those amounts included in the price on which Colorado sales tax is computed?
Yes to both. 'Hostess dollars' are credits, not discounts—the hostess earns them in a quid pro quo exchange for opening her home and generating sales—so Colorado sales tax is computed on the full purc…
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…
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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.