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?

Plain-English summary

An out-of-state company that does crime-scene and biohazard property remediation — cleaning property contaminated with blood or other biohazards through chemical wipe-downs of walls, removal of flooring, and thermo-fogging to remove odors — asked whether its work is subject to Colorado sales tax.

The Department applied the "true object" test (Special Regulation 40, Service Enterprises): when a transaction mixes a service with some transfer of tangible personal property, you ask whether the true object is primarily the service or primarily the sale of property. By analogy, a contractor who buys materials and builds them into a building is providing a construction service and is treated as the consumer of the materials — even though the materials end up with the property owner (Special Regulation 10, Contractors).

On these facts, the true object is a nontaxable service, even though some tangible personal property (like replacement flooring) is conveyed to the customer. That makes the remediation company the consumer of the chemicals, building materials, and equipment it uses to do the work.

Because it's the consumer, the company owes Colorado use tax on the tangible personal property it uses, stores, or consumes in Colorado (§ 39-26-204(1)(a)) — on which it hasn't already paid Colorado sales or use tax. It gets a credit against that Colorado use tax for the sales tax it already paid to its home state (§ 24-60-1301). Local and special-district taxes may also apply; the Department doesn't administer home-rule city/county taxes (see DR 1002).

What this means for you

Remediation, restoration, and cleaning companies

If your true object is a service — remediation, restoration, biohazard cleanup — you generally don't charge your customer sales tax on the job, even when you leave behind materials like flooring. Instead, you are the consumer of the supplies you use, and the tax falls on your purchases: pay sales tax when you buy them, or use tax if you bring them into Colorado without having paid Colorado tax.

Don't double-count the credit

If you already paid another state's sales tax on the chemicals and materials you carry into Colorado, you can credit that against the Colorado use tax you owe — you're not taxed twice on the same property. Keep the purchase records that prove the tax you paid.

"Some property changes hands" doesn't make it a sale

Conveying flooring or supplies to the customer doesn't convert a service into a taxable retail sale. The test is the true object of the whole transaction, not whether any property moves.

Common questions

Q: Do I charge my customers sales tax for crime-scene or biohazard remediation?
A: No. The true object is a nontaxable service. You don't collect sales tax on the remediation job, even though you may install materials like flooring.

Q: So is there no tax at all?
A: There's tax — just on you, not your customer. As the consumer of the chemicals, materials, and equipment you use, you owe sales tax when you buy them, or Colorado use tax if you bring them in without paying Colorado tax.

Q: I already paid tax on my supplies in another state. Do I pay again in Colorado?
A: You get a credit for the other state's sales tax against your Colorado use tax, so you're not taxed twice on the same property.

Q: Can I rely on this letter?
A: No. It's a General Information Letter — general guidance, not binding on the Department.

Citations and references

Statutes, regulations, and publications:
- § 39-26-204(1)(a), C.R.S. — use tax on tangible personal property used, stored, or consumed in business
- § 24-60-1301, C.R.S. — credit for sales tax paid to another state
- Special Regulation 40 (Service Enterprises) — the "true object" test
- Special Regulation 10 (Contractors) — the provider is the consumer of materials it incorporates
- Department publication DR 1002 — list of cities, counties, home-rule jurisdictions, and special districts

Related Colorado true-object / service letters:
- [[gil-08-025-xxxxxxxxxxxxx-program]] — dental rewards program analyzed under the same true-object/service framework
- [[gil-08-010-taxability-of-school-material]] — distance-learning course materials taxable; true object was the materials, not a service
- [[gil-08-005-taxability-of-merchandising-and-related-services]] — merchandising/related services true-object analysis

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-07-003.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-2007-3

XXXXXXXXXXXXXXX
Attn: XXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
December 4, 2007
Re: remediation services
Dear XXXXXXXXXX,
This letter is in response to your letter to the Colorado Department of Revenue, dated June 7, 2007, re: sales
tax liability of crime scene property remediation work. We apologize for the time it has taken to respond to your
inquiry.
Issues
Is the company’s crime scene remediation work taxable in Colorado?
Background
You represent a foreign corporation which specializes in crime scene property remediation work. Specifically,
the corporation remediates property that has become contaminated with blood or other biohazardous
substances. The company performs a number of tasks, including: chemical wipe down of walls, etc.; removal of
flooring; and thermo-fogging of property to remove odors caused by the contamination.
Discussion
You state that you do not believe that the company is subject to Colorado sales tax because: (1) the company
provides a non-taxable service, (2) the company does not sell at wholesale or retail any tangible personal
property, and (3) the property used by the company are purchased in [State] and [State] sales tax is paid on
those purchases..
To determine whether a company is providing a service during which tangible personal property is conveyed to
the customer, or selling tangible personal property that is subject to sales tax, the Department will look whether
the “true object” of the transaction is primarily a service or primarily the sale of tangible personal property. See
Special Regulation 40 (Service Enterprises). For example, a contractor who purchases tangible personal
property and incorporates it into a building is considered to be providing the service of construction and is
considered the consumer of the building material, even though the building material is ultimately conveyed to
the property owner. See Special Regulation 10 (Contractors).
Based on the limited facts set forth in your letter, it appears that the true object of the company’s business is the
provisioning of a service that is not subject to sales tax, even though some tangible personal property (flooring)
is conveyed to the customer. The company is the consumer of the tangible personal property (e.g., chemicals,
building materials, equipment) used in the performance of its services.

The company will be liable for Colorado use tax for tangible personal property it uses, stores, or consumes in
Colorado. Specifically, §39-26-204(1)(a), C.R.S. provides:
Every person subject to the provisions of this part 2 who uses, stores, or consumes tangible personal
property in the conduct of a business in this state, which property is purchased either inside or outside
this state, and who has not paid the sales or use tax imposed by this article to a retailer shall make a
return and remit the tax imposed by this part 2 to the executive director of the department of revenue for
the preceding period covered by the remittance on forms prescribed by him, showing in detail the
tangible personal property stored, used, or consumed by said person in the conduct of his business
within the state in the preceding period covered by the remittance and on which property the said sales
or use tax has not been paid. Every person subject to the provisions of this part 2 shall maintain
monthly records of the amount of tax due. At such time as the cumulative tax due at the end of any
month is in excess of three hundred dollars, such person shall make a return and remit the tax due
before the twentieth day of the following month. If the total tax due in a calendar year is less than three
hundred dollars, such person shall make a single return and remittance for such calendar year before
January 20 of the following calendar year.
The company is entitled to a credit against this use tax liability in an amount equal to the [State] sales tax. §2460-1301, C.R.S.
Please note that there are a number of cities, counties, and special districts that impose both sales and use tax.
The department administers the sales taxes of state-administered cities, counties, and special districts. Sales
and use taxes of home-rule cities and counties are not administered by the department. In addition, use taxes
levied by state-administered cities and counties are not administered by the department. You should contact
these jurisdictions for more information about their use taxes. The department does administer both the sale
and use taxes of special districts. For a list of all cities, counties, home-rule cities and counties, and special
districts, see department’s publication DR 1002. You can view and download this publication at:
www.revenue.state.co.us (go to Taxation > Forms > Businesses > Sales Tax).
Finally, the Department makes a good faith effort to provide accurate and complete answers to questions posed
to it by taxpayers. However, the information and answers provided here are not binding on the Colorado
Department of Revenue, nor do they replace, alter, or supersede Colorado law and regulations. The Executive
Director, who by statute is the only person having authority to bind the Department, has not formally reviewed
and/or approved this response.
Respectfully,

Office of Tax Policy
Colorado Department of Revenue