Are outsourced call-center / contact-center services subject to Colorado sales tax?

Plain-English summary

A company provides outsourced contact-center / call-center services — acting as a "remote office" for bilingual (Spanish-language) customer care, technical support, customer acquisition, and e-services. Its live agents (located abroad) answer calls from U.S. customers; its equipment encrypts and reroutes incoming calls, and it bills clients based on phone hours used. It was considering a contract to handle Spanish-language billing and video-tech-support calls for an internet/cable provider, and asked whether its services are subject to Colorado sales tax.

No. In general, Colorado sales tax doesn't apply to services. There's an important exception — Colorado does tax telephone service (§ 39-26-104(1)(c)). But the key distinction is user vs. provider: the call-center company is a user of telephone service to deliver its support services, not a provider selling telephone service to its clients. So the call-center services themselves are not subject to Colorado sales tax.

What this means for you

Call centers, BPOs, and outsourced support providers

Selling customer support, technical assistance, or contact-center capacity is selling a nontaxable service in Colorado — even though you bill by phone-hours and rely heavily on phone lines. The fact that you use telephone service to do the work doesn't turn your service into taxable "telephone service."

The user-vs-provider line

Colorado taxes telephone service sold by the provider of that service. If you're buying and using telephone/telecom service as an input to deliver something else (support, answering, dispatch), you're a user, and what you sell isn't taxed under the telephone-service rule. The same line separates a telecom carrier's taxable offering from a downstream service that merely consumes telecom.

Common questions

Q: Are call-center or answering services taxable in Colorado?
A: No. They're nontaxable services. Colorado generally doesn't tax services, and a call center is a user of telephone service, not a seller of taxable telephone service.

Q: We bill by phone-hours — does that make it telephone service?
A: No. How you price it doesn't change the analysis. You're using telephone service to provide support; you aren't selling telephone service to your client.

Q: When would phone-related charges be taxable?
A: When the seller is actually the provider of telephone service (§ 39-26-104(1)(c)) — not when a business merely uses telephone service to deliver another service.

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:
- § 39-26-104(1)(c), C.R.S. — Colorado sales tax applies to telephone service (sold by the provider)

Related Colorado service / telecom letters:
- [[gil-07-004-taxability-of-dark-fiber]] — "lit" fiber is taxable telephone service (sold by the provider), contrasting with a mere user
- [[gil-07-003-remediation-services]] — true-object service is nontaxable; provider is consumer of its inputs
- [[gil-08-002-web-hosting-computer-software]] — web hosting analyzed as a nontaxable service

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-07-017.pdf

Original ruling text

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

GIL-2007-17

XXXXXXXXXXXX
Attn: XXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
December 4, 2007
Re: taxability of call center services
Dear XXXXXXXXX,
This letter is in response to your letter to the Colorado Department of Revenue, dated July 6, 2007, re: taxability
of call center services. We apologize for the time it has taken to respond to your inquiry.
Issue
Are call center services taxable in Colorado?
Background
You state that your client is a provider of outsourced contact center services or call center services. Your client
provides these services to companies throughout the United States. Customers engage your client to serve as
a “remote office” for bilingual contact center operations, providing customer care, technical support, customer
acquisition and e-services for Spanish-language customers.
Your client is a [State A] company with administrative offices in [State B] and three call centers in [Country].
The [State B] office provides administrative functions and marketing. The call centers in [Country] have live
agents who answer customer questions located in the United States. The client has telephone and computer
equipment in [State B] and [Country]. The [State B] equipment encrypts all incoming calls and reroutes them to
the call centers. Calls originate in the United States and from the call center to customers in the United States.
Your client bills its customers based on the number of phone hours used in providing the service.
Your client is considering entering into a contract with an Internet and cable service provider. The client would
handle Spanish-language telephone calls concerning billing matters and video technology support services on
behalf of the provider. You ask whether the service provided by the client is subject to Colorado sales tax.
Discussion
The company is providing services that are not taxable in Colorado.
Based on the representations you have made, it does not appear that the services your client would provide to
the Internet and cable service company are subject to sales tax. In general, Colorado sales tax does not apply
to services. Although sales tax does apply to telephone service (§39-26-104(1)(c), C.R.S.), your client is a user

of telephone service, not the provider of telephone service. Therefore, the services provided by your client are
not subject to sales tax.
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