For a commercial furniture dealer, which charges — delivery, installation, reconfiguration, repair, storage, freight-in, design — are subject to Colorado sales tax?

Plain-English summary

A commercial furniture dealership sells, delivers, installs, and services products in Colorado, and asked which of its many charges are taxable. The governing principle: Colorado taxes sales of tangible personal property; services are generally not taxed, but a service that is inseparable from the sale of the goods is included in the taxable price (§ 39-26-102(12); A.D. Stores, 19 P.3d 680 (Colo. 2001)). The whole letter assumes the dealer is a retailer, not a contractor — a crucial distinction governed by Special Regulation 10 (Contractors) (relevant if the dealer custom-builds and installs into realty rather than selling finished goods).

Item-by-item:

• Resells furniture — taxable if a sale to the end user; no tax if a sale for resale to another retailer.
• Delivery / transportation charges — presumably not taxable if separable and separately stated; the test is whether the buyer has a realistic option to get the product without using the dealer for transport (e.g., could hire a third party).
• Unload/install products shipped to the site — installation taxability per Special Regulation 10; delivery treated as above.
• Labor to reconfigure or dismantle previously installed products — not taxable, unless the service is not optional or not separately stated.
• Labor to repair, refinish, reupholster — taxable if the dealer owns the product and sells the repaired/refinished/reupholstered item (tax on both product and labor); not taxable if the customer owns the product (labor on customer-owned goods is a nontaxable service) — see FYI Sales 54 and Special Regulation 42 (Upholsterers).
• Storage of the client's products — costs that are part of the sale are in the taxable price unless separable and separately stated; the Department weighs whether the service is offered after the sale and whether the buyer has a realistic option to buy the product without it.
• Freight-in (inbound to the installer's warehouse or to the client's site) — generally taxable. Per Special Regulation 18, transportation charges to bring property from the producer/manufacturer to the seller (or its agents) are "freight-in" and are not an exempt transportation charge.
• Design / space planning, design drawings, on-site project manager — same treatment as storage above (taxable if part of the sale and not separably stated; nontaxable if a genuinely separable, separately stated, optional service).

What this means for you

Furniture dealers, office fit-out, and FF&E vendors

Your services are taxable when they're baked into the sale and nontaxable when they're optional, separately stated, after-the-sale choices the customer could decline or source elsewhere. Design, project management, storage, reconfiguration can all be nontaxable — but only if structured that way on the invoice. Freight-in is taxable; don't treat inbound freight like exempt outbound delivery.

Retailer vs contractor is the threshold question

If you custom-build and install into real property, you may be a contractor (consumer of your materials) rather than a retailer — a different tax regime under Special Regulation 10. The answers above assume you're a retailer selling finished goods. Pin down which you are before applying them.

Who owns the item decides repair-labor tax

Repairing your own inventory and selling it = tax on product and labor. Repairing the customer's own furniture = nontaxable labor (you owe tax on any parts you consume). The ownership of the item flips the result.

Common questions

Q: Are delivery and installation charges taxable for a furniture dealer?
A: Delivery is nontaxable only if it's separable and separately stated, with the buyer free to use a third party. Installation taxability follows Special Regulation 10; when inseparable from the sale, it's in the taxable price.

Q: Is freight-in taxable?
A: Yes. Inbound freight bringing goods from the manufacturer to the seller is "freight-in" and is taxable (Special Regulation 18) — unlike a separable, separately stated outbound delivery charge.

Q: Do I tax reupholstery or repair labor?
A: If you own the item and sell it repaired/reupholstered, yes — tax both product and labor. If the customer owns the item, the labor is nontaxable (you pay tax on the parts).

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 cases:
- § 39-26-104(1)(a), C.R.S. — imposition of sales tax on retail sales
- § 39-26-102(12), C.R.S. — services inseparable from the sale are included in the tax base
- Special Regulation 10 (Contractors) — retailer vs contractor distinction
- Special Regulation 18 — freight-in charges are taxable
- Special Regulation 42 (Upholsterers); FYI Sales 54; FYI Sales 82 (credit for taxes paid to another state)
- A.D. Stores v. Department of Revenue, 19 P.3d 680 (Colo. 2001) — services not taxable if separable

Related Colorado dealer / contractor / separability letters:
- [[gil-08-027-ruling-request-commercial-signage-and-installation]] — install/removal, freight, crating, and the retailer-vs-contractor chain
- [[gil-08-030-xxxxxxxxxxxxx]] — fabrication labor and the use-tax base for made-to-order goods
- [[gil-07-016-taxability-of-services-and-equipment]] — separable, separately stated services not taxable

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-07-020.pdf

Original ruling text

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

GIL-2007-20

XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
December 4, 2007

Re: Taxability of commercial furniture dealership
Dear XXXXXXXXXXX:
This letter is in response to your letter to the Colorado Department of Revenue, dated September 7, 2007 re:
taxability of furniture dealership We apologize for the time it has taken to respond to your inquiry.
Issues
Are the services and goods taxable in Colorado under the circumstances described below?
Background
Your company sells and installs products in Colorado. You business operations include a variety of services.
You ask what services are taxable under a variety of circumstances, outlined below.
Discussion
Colorado levies sales tax on the sale of tangible personal property. §39-26-104(1)(a), C.R.S. Services, in
general, are not subject to sales or use tax. However, the consideration paid for services that are inseparable
from the sale of the goods is included in the calculation of the sales or use tax. §39-26-102(12), C.R.S. A.D.
Stores v Department of Revenue, 19 P3d 680 (Colo. 2001).
It is not clear whether your client custom builds product and then installs the product or your client purchases
pre-fabricated product and installs the product. The taxability of such sales and services are explained in detail
in the Department’s Special Regulation 10 (Contractors). You can view and download this special regulation by
visiting our web site at:
www.revenue.state.co.us/taxstatutesregs/3926regSR10Contractors.html
You list several services and ask if tax applies. The responses below are premised on the assumption that your
client is a retailer, not a contractor. See Special Regulation 10, above, for a full discussion of this distinction.
Please also consider FYI Sale 82 regarding credit for taxes paid to another state.
Resells furniture products – Dealership must collect tax if this is a sale to the end user. No tax applies if this is
a sale for resale to another retailer.

Receives products at warehouse, which are then delivered and installed – See Special Regulation 10 regarding
taxability of installation. Delivery charges are presumably not taxable, unless they are separable and
separately stated on the invoice. In determining whether a delivery charge is separable from the purchase of
the property, the department will consider, among other things, whether the buyer has a realistic option to
purchase the product without using the lessor to provide the transportation service (e.g., buyer has the option of
hiring a third-party to transport the property).
Unloads and installs products that were shipped directly from manufacturer to the project site – Same as 2,
above.
Labor to reconfigure or dismantle previously installed products – not taxable, unless the service is not optional
or not separately stated on the invoice.
Labor to repair, refinish and reupholster products – if the dealership owns the product and sells the repaired,
refinished or reupholstered product, then the tax applies to both the product and labor costs for repairing,
refinishing, or reupholstering. If the client owns the product, then the labor costs are not taxable. See, FYI
Sales 54. (Special Regulation 42 re: Upholsterers).
www.revenue.state.co.us/taxstatutesregs/3926regSR42Upholsterers.html
Storage of client’s products – costs incurred by retailer as part of the sale of a product are included in the
purchase price and are taxable, unless the cost is separable and separately stated on the invoice. In
determining whether a cost is separable, the department will consider, among other things, whether the service
is offered after the sale occurs and whether the buyer has a realistic option to acquire the product without the
service.
Freight in bound to an installer’s warehouse or direct to a client’s site – Freight in charges are generally taxable.
See, Special Regulation 18 (“Intermediate or ‘Freight in’ charges. Transportation charges incurred in connection
with transporting tangible personal property from the place of production or the manufacturer to the seller or to
the seller's agent or representative, or to anyone else acting in the seller's behalf, either directly or through a
chain of wholesalers or jobbers or other middlemen, are deemed "freight -in" charges and are not a
transportation charge exempt from tax.”).
Provides design and space planning – Same as 6, above.
Prepares design drawings for installers – Same as 6, above.
Provides on site project manger to coordinate and direct installation – Same as 6, above.
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