Are optional, separately stated clothing alterations (hemming, shortening, taking in) ordered at the time you buy the garment subject to Colorado sales tax?

Plain-English summary

A clothing retailer asked whether alteration services are taxable in this specific setup: a separately stated charge for modifying a garment (shortening, hemming, taking in), where the alterations are optional to the customer and requested at the point of the original sale of the clothing.

The Department's answer: not taxable. It pointed to the Colorado Supreme Court's decision in A.D. Stores v. Department of Revenue, 19 P.3d 680 (Colo. 2001), which addressed exactly this — alteration services the customer orders from the retailer at the time of buying the clothing are separable from the taxable sale of the clothing. Because the alteration is a separable service, the separately stated alteration charge is not subject to sales or use tax.

(The Department framed this as a general information letter and noted that a GIL doesn't apply the law to a specific set of facts.)

What this means for you

Clothing retailers and tailors

If you offer alterations as a genuine option the customer can decline, and you separately state the alteration charge, Colorado doesn't tax that charge — even when the customer arranges the alterations at the same time they buy the garment. The clothing itself is taxable; the optional alteration labor is a separable service that isn't.

Keep it optional and separately stated

The favorable result rests on separability — the A.D. Stores test that runs through Colorado's service rulings. Two things preserve it: the customer must have a real choice not to buy the alterations, and the charge must be separately stated. If you bundle alterations into the garment price, or make them mandatory, you risk losing the separate treatment.

Different facts can change the answer

This covers alterations to newly purchased clothing ordered at the point of sale. Other scenarios — alterations on a customer's own existing garments, or alterations bundled inseparably into a sale — turn on their own facts; a binding answer would require a private letter ruling.

Common questions

Q: Do I charge sales tax on hemming or taking in a garment a customer just bought? A: No, when the alteration is optional and separately stated. Under A.D. Stores, alterations ordered at the time of purchase are separable from the taxable clothing sale and aren't taxed.

Q: What makes the alteration nontaxable?
A: Separability — the customer can choose not to buy it and it's billed as a separate, stated charge. That's what keeps it out of the taxable price of the clothing.

Q: Is the clothing itself still taxable?
A: Yes. The garment is taxable tangible personal property; only the separable, optional alteration service is exempt from tax here.

Q: Can I rely on this letter?
A: No. It's a General Information Letter — general guidance, not binding on the Department, and it doesn't apply the law to a specific set of facts.

Citations and references

Case:

• A.D. Stores Co. v. Department of Revenue, 19 P.3d 680 (Colo. 2001) — alteration services ordered at the time of purchasing clothing are separable from the taxable sale and not taxable

Related Colorado separability letters:

• [[gil-08-020-taxability-of-certain-goods-and-services]] — separability of training and other services bundled with a sale
• [[gil-08-016-software-updates-and-support-services]] — required vs. optional service charges

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-08-024.pdf

Original ruling text

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

GIL-2008-24
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Re: taxability of alteration services
Dear XXXXXXXX,
The department has reviewed your letter dated August 18, 2008 regarding the taxability of alteration services. The department recently enacted a regulation governing requests for tax advice. See, §24-35-103.5, C.R.S. and Department regulation (24)-35103.5. Pursuant to this regulation, the department issues both private letter rulings and general information letters. Private letter rulings are issued in response to tax issues raised in specific factual settings, are binding on the department, and require payment of a fee. General information letters are issued in response to general tax questions and are not binding on the department. You can view this regulation on-line at: http://www.revenue.state.co.us/taxstatutesregs/3921reg24-35-103.5.html A general information letter will not address the applicability of the law to a specific set of facts, such as you have outlined above. Therefore, this response is issued as a general information letter. Issue You ask whether alteration services are subject to sales or use tax under the following conditions: A separately stated charge for modifications made to an article of clothing, such as shorting, hemming, or taking in. The alterations are optional to the customer and are requested at the point of the original sale of the clothing article. Discussion In A.D. Stores v. Department of Revenue, 19 P3d 680 (Colo. 2001), the Colorado supreme court addressed the taxability of alteration services and held that alteration service, which the customer ordered from the retailer at the time of the purchase of the clothing, was separable from the taxable sale of the clothing. Therefore, alteration services provided under these circumstances are not taxable. The department offers retailers an abundance of sales tax related resources. These are easily accessed through our web site at: www.revenue.state.co.us. Click on “Taxation” >

“Publication / Resources” and then select FYIs, Regulations, or Tax Information Index. Finally, and pursuant to state law, the Department will make public a redacted version of this letter. Your letter requesting this informational letter is not made public. See, §24-35103.5(13), C.R.S. The regulation governing private letter rulings and informational letters is available on our web site at: http://www.revenue.state.co.us/taxstatutesregs/3921reg24-35103.5.html. I enclose a proposed redacted version of this letter. Please contact me within 60 days from the date of this letter if you have any questions, comments or concerns about the redacted letter. Please feel free to contact me if you have any questions. Sincerely,

Office of Tax Policy
Colorado Department of Revenue