Does a company that sells and installs a factory-built (modular) home in Colorado owe sales tax, and is any part of the price exempt?
Plain-English summary
A company sold a modular home — bought from an out-of-state factory and delivered to a buyer in Weld County, Colorado — and then completed the on-site construction so the buyer could get a certificate of occupancy. It asked whether it owes Colorado sales or use tax.
The Department's guidance: a factory-built home is taxable tangible personal property, and as the seller the company is obligated to collect the tax from the buyer and remit it to the Department. But Colorado gives factory-built housing a large partial exemption — 48% of the purchase price is exempt — so sales tax is charged on only the remaining 52%.
"Factory-built housing" includes modular or sectional homes and mobile homes used primarily for residential occupancy. A modular/sectional home is a factory-built structure built to the customer's specs or inventory standards, not titled, possibly eligible for HUD/FHA long-term financing, built to conventional residence codes, and separable from its delivery chassis. For homes that are titled as mobile homes, no certificate of title is issued until the tax due on the sale has been paid.
What this means for you
Dealers and sellers of modular / factory-built homes
You collect Colorado sales tax as the seller, but on only 52% of the purchase price — the statute exempts 48% of the price of factory-built housing. Buying the unit from an out-of-state factory doesn't remove the Colorado tax; the taxable event is your sale to the Colorado buyer.
Buyers of modular and manufactured homes
Expect sales tax on 52% of the price, not the full price. If the home is titled as a mobile home, the title won't issue until that tax is paid, so budget for it as part of closing.
Builders and contractors
The construction/installation services you perform to finish the home and obtain a certificate of occupancy are a separate matter from the tax on the sale of the home itself. The 48% exemption is keyed to the price of the factory-built housing.
Common questions
Q: Is the whole price of a modular home taxable in Colorado?
A: No. 48% of the purchase price of factory-built housing is exempt, so Colorado sales tax applies to only 52% of the price.
Q: We bought the unit from a factory in another state. Does Colorado tax still apply?
A: Yes. The Department's guidance is that the taxable sale is the seller's sale to the Colorado buyer; the seller must collect and remit Colorado tax (on 52% of the price).
Q: What counts as "factory-built housing"?
A: Modular or sectional homes and mobile homes used primarily for residential occupancy. The letter sets out the statutory definitions of mobile, manufactured, and modular/sectional homes.
Q: Can I rely on this letter?
A: Not as a binding ruling. A General Information Letter is general guidance and is not binding on the Department. For a binding determination on your facts, request a private letter ruling, and check with any home-rule city about its own tax.
Citations and references
Statutes and rules:
- § 39-26-721(1), C.R.S. — 48% of a factory-built housing's purchase price is exempt from sales tax
- § 24-32-703(3), C.R.S. — definition of "factory-built housing"
- § 24-32-703(6.1), C.R.S. — definition of "manufactured home"
- § 24-32-703(6.3), C.R.S. — definition of "mobile home"
- Colo. Code Regs. § 39-26-721.1 — factory-built housing exemption rule
- 1 CCR 201-5 — definition of a modular or sectional home
- § 39-26-113(1); § 39-26-208(1), C.R.S. — no certificate of title for a mobile home until the tax is paid
Source
- Landing page: Colorado Sales & Use Tax Letter Rulings
- Original PDF: GIL-09-024.pdf
Original ruling text
Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]
GIL-09-024
May 13, 2009
XXXXXXXXXXXX
Attn: XXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
Re: modular home sale
Dear XXXXXXXXX,
You request guidance regarding a modular home sold by your company. The Department
issues general information letters and private letter rulings. A general information letter
provides a general overview of the applicable tax law, does not provide a specific
determination, and is not binding on the department. A private letter ruling is a determination of
the applicability of tax to a specific set of circumstances and is binding in the department. A
party requesting a private letter ruling must provide certain information and remit a fee. For
more information about general information letters and private letter rulings, please refer to the
Department’s regulation 24-35-103.5, C.R.S., which is available on our web site at:
www.colorado.gov/revenue/tax. You have requested a general information letter.
Issue
Is the Company liable for sales or use tax in Colorado?
Discussion.
You state that your company sold a modular home to a Colorado buyer. The home was
purchased directly from the factory, which we assume is located in XXXXX [another state], and
delivered to the purchaser in Weld County, Colorado. You have completed the home, which we
assume means that the Company performed a variety of construction services related to
installation and completion of the home in order to receive a certificate of occupancy from the
county.
Colorado imposes sales tax on the sale of tangible personal property, including factory-built
homes. As the seller of such property, you are obligated to collect this tax from the buyer and
remit the tax to the Department.
Forty–eight percent of a factory–built housing's purchase price is exempt from the sales tax.
§39-26-721(1), C.R.S. “Factory–built housing” includes modular or sectional homes, and
mobile homes used primarily for residential occupancy. §24-32-703(3), C.R.S.; Colo. Code
Regs. §39-26-721.1 .
Mobile home defined: A “mobile home” is a structure, transportable in one or more sections,
that is:
•
•
•
at least eight by thirty–two body feet in width and length;
built on a permanent chassis;
designed to be used as dwelling without permanent foundation when connected
to required utilities (plumbing, heating, air conditioning, and electrical systems).
Colo. Rev. Stat. §24-32-703(6.3).
A manufactured home is defined as a pre-constructed complete building unit or combination of
pre-constructed complete building units without motor power designed and commonly used for
single–family residential occupancy by those in either temporary or permanent locations, which
unit or units are manufactured in a factory or at a location other than the completed home's
residential site and which units are not licensed as a recreational vehicle. §24-32-703(6.1),
C.R.S.
A modular or sectional home is defined as a factory-built structure that:
•
•
•
•
•
is built to a customer's specifications or inventory standards;
is not titled;
may be approved for HUD/FHA long-term financing;
complies with conventional residence building codes; and
is separate from its delivery chassis. Colo. Code Regs. §1 CCR201-5
No certificate of title will be issued for a mobile home until any tax due on its sale and purchase
has been paid. Colo. Rev. Stat. §39-26-113(1) ; Colo. Rev. Stat. §39-26-208(1).
Miscellaneous
Enclosed is a redacted version of this ruling. Pursuant to statute and regulation, this redacted
version of the ruling will be made public within 60 days of the date of this letter. Please let me
know in writing within that 60 day period whether you have any suggestions or concerns about
this redacted version of the ruling.
Sincerely,
Office of Tax Policy
Colorado Department of Revenue
2