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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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…
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 motorized scooters and orthopedic items like a walker boot, post-op soft shoe, and suspension boot exempt from Colorado sales tax?
No—all are taxable. Motorized scooters don't qualify for the wheelchair exemption: exemptions are narrowly construed, and these aren't commonly understood to be wheelchairs (even the makers don't call…
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 software-as-a-service (SaaS) hosting fees and network-connectivity fees subject to Colorado sales or use tax?
Apparently not. On the limited facts, the Department found that neither a SaaS hosting fee (the right to use hosted software, with no ownership transferred) nor a separately billed network-connectivit…
Does Colorado sales or use tax apply to custom software, standalone services, installation, repairs, freight, and training sold with telecommunications equipment?
Mostly no, with one big 'it depends.' Custom software, standalone services, repair labor, and training are generally not subject to Colorado sales tax. Freight/transportation is generally not taxable …
If a multi-level marketing company sells through independent distributors in Colorado, is sales tax figured on the suggested retail price or on what the customer actually paid, and who is liable if a distributor fails to collect it?
Sales tax is figured on the money actually received in cash and credits, not the suggested retail price. Colorado lets the company treat its independent distributors as its agents, so the company is t…
Will Colorado accept an electronically captured exemption/resale certificate with an electronic signature as adequate audit documentation, and what due diligence must the cashier still do?
Yes, with safeguards. Colorado will accept an electronically captured exemption or resale certificate with an electronic signature as adequate audit documentation, but the cashier must still: view the…
Is market/consumer research delivered on paper or CD a taxable product or a nontaxable service in Colorado?
It depends on custom vs. repetitive. Under the 'true object' test, market or consumer research created for a single specific client is a nontaxable service, with the paper or CD treated as incidental …
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…
Is carbon dioxide sold to a retailer to carbonate fountain drinks taxable, and is the rental of the tank system that ships and stores it taxable?
The carbon dioxide is exempt — it becomes an ingredient of the soft drink, so the supplier's sale to a retailer is an exempt sale for resale. The shipping tank is also exempt as the container for an e…
After a sale is completed, can the retailer and buyer rescind it, claim a sales-tax refund, and resell the property to a leasing company that then leases it back to the buyer?
Only if there's a genuine full refund. Sales tax is a tax on a completed transaction, and later recasting the deal — rescinding it and reselling to a leasing company that leases the property back — do…
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…
Is a service contract bought together with rented office equipment taxable in Colorado?
It depends on whether it's a separate contract. If the equipment rental and the service contract are one bundled deal, the entire consideration is taxable unless the retailer gets Department permissio…
Are outsourced call-center / contact-center services subject to Colorado sales tax?
No. Outsourced call-center / contact-center services aren't subject to Colorado sales tax. Colorado generally doesn't tax services, and although it does tax telephone service, the call-center company …
Are CCTV consulting and project-management fees taxable in Colorado, and can a company credit sales tax it paid another state on equipment it bought to resell to its client?
Consulting and project-management fees for a video-surveillance system are not taxable if they're genuinely separable from the equipment sale and separately stated on the invoice (the Department won't…
When a night club collects all the money for a meal-and-show package sold with a separate restaurant, who reports and remits the sales tax?
It depends on the structure. If the night club is acting only as the restaurant's collecting agent, each business can report and remit sales tax on just its own portion of the package, even though the…
For short-term rentals of oilfield living quarters, water/sewer systems, generators, transportation, cleaning, and consumables, who owes Colorado tax and on what?
For rentals of three years or less, the lessor is treated as the end user: it owes sales or use tax on what it paid for the equipment (with credit for tax paid another state), rather than charging tax…
Can a retailer buy bulk gift-card stock tax-free as a sale for resale, and is a transaction-tracking service bundled with the cards taxable?
No resale exemption. A gift card is functionally a credit voucher, not something the retailer actually sells to the customer (there's no separate charge for the card itself), so a retailer's bulk purc…
Are leases of dark (unlit) fiber-optic cable, and charges for 'lit' fiber, subject to Colorado sales or use tax?
It depends on the fiber. Leasing dark (unlit) fiber-optic cable is a taxable lease of tangible personal property if the cable keeps its identity as property and can be removed without significant dama…
Is crime-scene / biohazard property remediation (chemical wipe-downs, flooring removal, odor thermo-fogging) a taxable sale of property or a nontaxable service in Colorado?
It's a nontaxable service. Under Colorado's 'true object' test, crime-scene and biohazard remediation (chemical wipe-downs, removing flooring, thermo-fogging out odors) is primarily a service, not a s…
Are energy drinks like Red Bull, and enhanced or carbonated waters, exempt 'food' or taxable in Colorado?
Energy drinks are taxable. Colorado exempts only 'food for domestic home consumption,' which it defines by what's eligible under the federal food-stamp (SNAP) and WIC programs. The USDA has determined…
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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.