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 partnership makes a one-off sale of Colorado real estate outside its regular business, do those gross receipts go into the apportionment factor that determines its owner's Colorado-source income?
No. Gross receipts from a partnership's infrequent, out-of-the-ordinary-course sale of Colorado real estate are not 'receipts' under § 39-22-303.6(1)(d), so they're excluded from the apportionment fac…
If a Colorado manufacturer sells goods to the U.S. Government for delivery out of state but stores them in Colorado until the government is ready, are those sales sourced to Colorado for income tax apportionment?
No. The receipts are not Colorado receipts. Goods sold to the U.S. Government are sourced to where they're delivered or shipped to the purchaser — outside Colorado — regardless of f.o.b. point or othe…
Can an individual taxpayer claim Colorado's foreign source income exclusion if they claim the federal foreign tax credit?
No. Colorado's foreign source income exclusion under § 39-22-303(10), C.R.S., is available only to C corporations, not to individuals. It sits within the Colorado C Corporation Income Tax Act and is t…
When a real estate rental partnership makes an infrequent sale of Colorado property, are the sale proceeds included as 'receipts' in its income apportionment factor?
No. Although the gain on a rental partnership's infrequent sale of Colorado real estate is apportionable income, the sale proceeds are not 'receipts' under § 39-22-303.6(1)(d) because the sale isn't i…
Is a corporation's gain from selling its LLC interest business income, and is that gain (or the LLC's sales) included in the Colorado apportionment factor?
On these facts: (1) the gain is business income, because the corporation's LLC interest was intangible property used in its trade or business (and a corporation can elect to treat all income as busine…
When an affiliated group's members must use different apportionment formulas (trucking, airlines, financial institutions, general), how does the group compute its combined Colorado income tax?
The affiliated group may use the subgroup methodology from the Department's prior rulings PLR-11-002 and PLR-15-005: financial and non-financial members eliminate all intercompany transactions, each s…
After an out-of-state buyer restructures the ownership, is a holding company's gain from selling its partnership interest included in Colorado's apportionment factor?
On these facts, no. The gain is business income (the holding company's whole business was buying, holding, and selling the investment), and the company includes its distributive share of the partnersh…
When a Colorado resident sells an interest in a multistate pass-through and another state taxes the gain, how is Colorado's credit for taxes paid to another state figured?
The resident gets a credit, but Colorado uses its own sourcing rules, not the other state's. To find the gain 'derived from sources' in the other state, the seller applies a three-year average of the …
How should a debt-collection company that buys charged-off receivables apportion its income when it fits none of Colorado's standard receipt categories?
As a service provider. The company isn't a 'financial institution' (it doesn't handle financial transactions or provide financial services, isn't a bank, and doesn't earn over 50% from finance leases)…
Can a company use separate accounting instead of Colorado's single-sales-factor formula to apportion its income—and what does it have to prove?
The Department denied this request. Colorado (like most states) abandoned separate accounting long ago: it conflicts with the single-sales-factor method the legislature adopted in 2010, it's administr…
For Colorado income tax apportionment, is digital imagery delivered electronically tangible personal property, and how is it sourced?
It's tangible personal property, sourced to where it's delivered. For Colorado income tax apportionment, a static digital image delivered electronically is treated as a sale of tangible personal prope…
Does an out-of-state S corporation owe Colorado tax when an employee works remotely from Colorado, even if that employee is a non-resident military spouse exempt from Colorado tax?
Yes. An out-of-state S corporation that performs services through an employee working in Colorado has Colorado-source income, because service income is apportioned to where the cost of performing the …
Does an out-of-state C corporation that only solicits sales orders for manufacturers — a service — have to file a Colorado corporate income tax return if it has a Colorado employee?
Likely yes, if it has Colorado nexus. An out-of-state C corporation must file a Colorado corporate income tax return if it has substantial nexus — property over $50,000, payroll over $50,000, sales ov…
Can a financial institution use an alternative, deposits-based apportionment instead of the financial-institution rule that sources investment income to where decisions are made?
Yes. The financial-institution special regulation (Special Regulation 7A) sources receipts from investment and trading assets to the location of the day-to-day decisions—a cost-of-performance approach…
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…
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 …
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…
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…
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…
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…
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…
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…
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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.