When must a Colorado auctioneer collect sales tax on items it sells (including motor vehicles), and when is the owner responsible instead?

Plain-English summary

An auctioneers' association asked when auctioneers who sell taxable goods — especially motor vehicles — must collect Colorado sales tax. (Because the Department doesn't issue private letter rulings to associations, it answered as a non-binding GIL; individual members can request their own rulings.) The bottom line: an auctioneer selling on an owner's behalf is generally the "retailer" and must collect and remit sales tax — with two exceptions.

Why the auctioneer and not the owner? In a normal retail sale the seller owns the goods. An auction is unusual because the auctioneer often doesn't own what it sells (the owner consigns goods, the auctioneer takes payment, deducts its fee, and remits the balance). Colorado resolves this with agency principles, codified in Reg. 39-26-102.1 and § 39-26-102(1.3): an auctioneer acting for an undisclosed owner is deemed the owner/retailer and must collect; a sale for a disclosed, properly licensed principal is treated as the principal's sale. The statute classifies auctioneers as retailers who must collect on auction sales unless the owner is licensed or the sale is exempt.

The general rule: an auctioneer selling a vehicle (or other taxable goods) for an owner is a retailer and must collect and remit, unless one of two exceptions is fully met.

Exception 1 — disclosed, licensed owner (all three conditions required):
1. the owner holds a Department sales tax license;
2. the owner's identity is disclosed to the buyer when the auctioneer collects payment (including the sales tax); and
3. the auctioneer turns over to the licensed owner the full purchase amount, including the sales tax.

If any condition is missing, the auctioneer must collect and is liable for unremitted tax. So an auctioneer is on the hook if it doesn't disclose a licensed owner — even if it passed the buyer's tax payment to that owner and the owner then failed to remit — because an undisclosed-owner sale makes the auctioneer the deemed retailer. (Note: the auctioneer's commission is an inseparable part of the purchase price and is included in the sales tax calculation; the auctioneer may keep its commission but the full sales tax must go to the owner.) The Department cited J.A. Tobin Construction Co. v. Weed — paying an unlicensed seller is no protection against the state later demanding the tax from the buyer.

Exception 2 — the sale is exempt, either because the item is exempt or the buyer/seller is exempt. Two exemptions auctioneers see often:
- Farm close-out sale (§ 39-26-716(4)(a)) — a sale by auction or private treaty of all of a farmer's/rancher's tangible personal property when the owner is making full and final disposition and abandoning the operation. To document it, the Department will presume due diligence if the auctioneer gets a signed written statement from the owner/agent with four specific declarations, gives a copy to the buyer for the county clerk at registration, and keeps the original for three years.
- Nonresident motor-vehicle purchaser (§ 39-26-113(5)(a)) — a vehicle sold to a nonresident who will use and register it out of state is exempt from all state and local sales/use tax.

Which taxes to collect (when the auctioneer must collect): for a Colorado sale to a Colorado resident, collect state tax, plus local (city/county) tax where the place of sale and the buyer's residence are in the same local jurisdiction, plus the special-district taxes (RTD/SCFD/stadium district) where both are in the district. FYI Sales 62 has the rules.

What this means for you

Auctioneers (general goods and motor vehicles)

Assume you must collect sales tax on consignment sales unless you can satisfy all three parts of the disclosed-licensed-owner exception, or the sale is clearly exempt. Disclosing the owner only matters if the owner is licensed, and you must remit the full sales tax (not net of your commission) to that owner. Selling at your own auction house? Gross receipts from those retail sales are taxable regardless of who owned the goods, and you need a sales tax license.

Farm and ranch auctions

The farm close-out exemption can apply, but it's narrow — it requires a complete, final disposition and abandonment of the operation, not just a sale of some equipment. Protect yourself with the signed four-point statement, give the buyer a copy for registration, and keep the original three years.

Vehicle buyers and sellers

A vehicle auctioned to a nonresident who registers it out of state is exempt. For Colorado-resident buyers, the auctioneer collects state tax plus local/special-district tax based on the place of sale and the buyer's residence sharing a jurisdiction.

Common questions

Q: Does the auctioneer or the owner collect the sales tax?
A: Generally the auctioneer, who is treated as the retailer. The owner is responsible only if the owner is licensed, is disclosed to the buyer at payment, and receives the full price including the tax — and even then only if all three conditions are met.

Q: I'm an auctioneer who disclosed the owner and handed over the buyer's tax payment, but the owner never remitted it. Am I off the hook?
A: Only if that owner was licensed and disclosed when you collected. If the owner wasn't disclosed (or wasn't licensed), you're the deemed retailer and remain liable for the tax.

Q: Is a farm equipment auction automatically tax-exempt?
A: No. The farm close-out exemption requires the farmer/rancher to be making full and final disposition of all farming property and abandoning the operation. A partial sale doesn't qualify. Document it with the signed statement and keep it for three years.

Q: Do I collect tax on a vehicle sold to an out-of-state buyer?
A: No, if the buyer is a nonresident who will use and register the vehicle out of state — that's exempt from all Colorado state and local sales/use tax.

Citations and references

Statutes, rules, and cases:
- § 39-26-102(15), C.R.S. (tangible personal property)
- Reg. 39-26-102.1 (auctioneer collection; disclosed vs. undisclosed principal)
- § 39-26-105(1)(a), C.R.S. (duty to collect, file, and remit)
- § 39-26-102(1.3), C.R.S. (auctioneers as retailers; "auction sale")
- § 39-26-102(10), C.R.S. (definition of "sale")
- § 39-26-716(4)(a), § 39-26-102(4), C.R.S. (farm close-out sale exemption)
- § 39-26-113(5)(a), C.R.S. (nonresident motor-vehicle purchaser exemption)
- J.A. Tobin Construction Co. v. Weed, 407 P.2d 350 (Colo. 1965)
- FYI Sales 62 (when to collect state-collected local sales taxes)

Related rulings

• [[gil-11-003-taxability-of-administrative-fees-sales-tax]] — auctioneer admin fees in the tax base
• [[gil-12-012-non-resident-leases-of-passenger-cars]] — nonresident motor-vehicle exemption
• [[gil-13-006-resale-exemption-certificates]] — disclosed-principal / resale documentation

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-11-004.pdf

Original ruling text

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

GIL-11-004

April 13, 2011
XXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX
Attention: XXXXXXXXXXXXXXX
Re: Sales tax collection by auctioneers
Dear XXXXXXXXXXX,
This letter is in response to your undated letter submitted on behalf of the

XXXXXXXXXXXXXXXXXXXXXXXXXXX: ("Association") to the Colorado Department of Revenue

regarding sales tax obligations of auctioneers who auction motor vehicles. By way of
background, the department issues private letter rulings and general information letters.
See, §24-35-103.5, C.R.S. and Department regulation 24-35-103.5. Private letter rulings
are issued in response to tax questions relating to the taxpayers' specific factual
circumstances and are binding on the department. General information letters provide
general tax advice that is not a determination with respect to a taxpayer's specific factual
circumstances, and they are not binding on the department. For more information about
rulings and letters, you can view this regulation on-line at: www.taxcolorado.org > FYI/
Publications> Rulings and click on "24-35-103.5."
The department does not issue private letter rulings to associations. However, individual
members of the Association may submit a request for a private letter ruling. Therefore, I
am initially treating the Association's request as a request for a general information letter.
Individual members can submit requests for private letter rulings regarding their specific
circumstances. Again, it is important to remember that general information letters, such as
this one, are general discussions of tax law and are not a determination of the tax
consequence of any particular auction sale of motor vehicles.

Issue
Are auctioneers who sell taxable tangible personal property, including motor vehicles,
required to collect sales tax?
1375 SHERMAN STREET
DENVER, COLORADO 80203

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April 13, 2011

Discussion
You provided the following description of the auction process for motor vehicles.
Auctioneers conduct "estate" sales, which are auctions conducted at a fann or ranch and at
which the owner's motor vehicle is sold. The auctioneer does not hold title to the motor
vehicle at any point. Rather, the auctioneer's obligation is to solicit and accept offers to
purchase from bidders. Once the auction is complete, the buyer tenders payment to the
auctioneer. The auctioneer deducts its fee from the proceeds and remits the balance to the
owner. The owner or the owner's executor/agent then assigns title to the motor vehicle to
the buyer. Bidders are generally aware prior to the sale that the owner of the farm or ranch
where the auction is conducted is the owner of the motor vehicle.
In some cases, the auctioneer will sell motor vehicles from the auctioneer's permanent
place of business. The process for the auction is much the same as described above,
although the owner of the motor vehicle is generally not disclosed to the bidder prior to the
sale.

a. Sales tax collection responsibilities of auctioneers.
Colorado law requires that a retailer of tangible personal property1 collect sales tax from the
buyer. In the typical retail transaction, the retailer is also the owner of the property. An
auction is somewhat unusual in that the auctioneer is often not the owner of the property
that he or she is selling. The question, then, is whether an auctioneer must collect sales
tax from the buyer.
The general rule adopted by many states is that when an owner's agent discloses to the
buyer that the agent is selling the goods on behalf of an owner, the agent is not responsible
for collecting sales tax from the buyer (the owner is liable for collection and reporting the
tax). When an agent does not disclose to the buyer that the agent is acting on behalf of an
owner. then the agent is responsible for collecting sales tax from the buyer. An auctioneer
is generally considered the agent of the owner and, therefore, is governed by these general
principles of agency.
Consistent with other states; the department promulgated regulation (39)26-102.1, which
addresses when an auctioneer is required to collect sales tax on auction sales.
Every auctioneer acting for an unknown or undisclosed principal, and who is
entrusted with possession of any bill of lading, customhouse permit, or
warehouseman's receipt for delivery of any tangible personal property, or who is
entrusted with possession of any such personal property for the purpose of sale,
shall be deemed to be the owner thereof and, upon the sale of such property,
shall be required to collect the tax, file a return, and remit the tax thereon. (See
C.R.S. 1973, 39-26-105(1)(a).)

1 Tangible personal property is defined as corporeal personal property. §39-26-102(15), C.R.S.
Motor vehicles are tangible personal property and, therefore, subject to sales and use tax.

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A sale by an auctioneer when acting for a known or disclosed and properly
licensed principal shall be deemed to be a sale by the principal; the principal shall
be responsible for collecting and remitting the tax and filing the return.
This regulation applies to lienholders, including storagemen, pawnbrokers,
mechanics and artisans who sell at auctions.
Gross receipts from retail sales by an auctioneer at his established auction
house, sales yard or other place of business are taxable, regardless of how the
property may have been acquired or by whom it may be owned and the
auctioneer is required to obtain a sales tax license.
The sale tax collection obligations of an auctioneer are also addressed in statute. See,
§39-26-102(1.3), C.R.S. This statute classifies auctioneers as retailers and requires
auctioneers to collect sales 1ax on auction sales unless the owner holds a sales tax license
issued by the department or the sale is exempt. Section 39-26-102(1.3), C.R.S. states,
"Auction sale" means the sale conducted or transacted at a permanent place of
business operated by an auctioneer or a sale conducted and transacted at any
location where tangible personal property is sold by an auctioneer when such
auctioneer is acting either as agent for the owner of such personal property or is
in fact the owner thereof. The auctioneer at any sales defined in subsection (11)2
of this section, except when acting as an agent for a duly licensed retailer or
vendor or when selling only tangible personal property that is exempt [...] is a
retailer or vendor [...] and the business conducted by said auctioneer in
accomplishing such sale is the transaction of a business as defined by this
section.
Although this statute does not explicitly make the distinction between a disclosed and
undisclosed owner, the distinction is an implicit and necessary part of the exception
involving a duly licensed owner. A buyer can discharge its sales tax obligation only by
paying a licensed retailer.3 If the licensed owner is not disclosed, a buyer cannot determine
whether he or she has discharged that tax obligation.
Taking the regulation and statute together, the following general statements can be made.
An auctioneer who sells a motor vehicle on behalf of an owner is, unless an exception
applies, a retailer and must collect and remit sales taxes administered by the department.
There are only two exceptions to this general rule. The first exception has three conditions:
2

This statutory reference to subsection (11) is incorrect. Subsection (11) addresses the taxability

of short term living accommodations, such as hotels. Living accommodations are rarely, if ever,
sold at auction. The correct reference should be to subsection (10), which contains the definition
of •sale" or ·sale and purchase."
3 J. A. Tobin Construction Co. v. Weed, Jr., Colorado Department of Revenue, 158 Colo. 430 407

P2d 350 (Colo. 1965)("Payment to an unlicensed seller Is not payment to the state and
provides no protection against a demand by the state upon the purchaser for payment of
the tax.").

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April 13, 2011

the owner must have a sales tax license issued by the department, the owner's identity
must be disclosed to the buyer when the auctioneer collects the buyer's payment (which
includes the sales tax), and the auctioneer must tum over to the licensed owner the full
amount of the purchase,4 including the sales tax.5 If all three conditions are not met, the
auctioneer must collect and remit the sales tax and is liable for uncollected or unremitted
sales tax.
For example, an auctioneer has a duty to collect and remit sales tax if the owner is not
disclosed to the buyer at the time the buyer makes payment to the auctioneer, even though
the owner is duly licensed by the department and the auctioneer has transferred the
buyer's sales tax payment to the owner (but the owner failed to remit the tax to the
department). This is so because the auctioneer is deemed the owner/retailer when the
identity of the owner is not disclosed.
In the case where both the auctioneer and owner are licensed, the auctioneer is, for these
same reasons, responsible for collecting and remitting sales tax if the licensed owner is not
disclosed, but the licensed auctioneer is relieved of those duties if the licensed owner is
disclosed.
Finally, auctioneers must collect sales tax if the owner is not a duly licensed retailer, even
though the auctioneer discloses the owner's identity.
The second exception to the auctioneer's duty to collect is when the sale is exempt from

tax, either because the item itself is not taxable {e.g., certain farm equipment and

agricultural products are exempt) or the buyer or seller are exempt from tax {e.g., the buyer
is a charitable entity or buys for resale). Although there are many exemptions from sales
tax, there are at least two of which auctioneers should be particularly mindful. One such
exemption that auctioneers may frequently encounter is the sale of tangible personal
property that qualifies as a "farm close-out sale." §39-26-716(4){a), C.R.5.6 A "farm close­
out sale" is,
[...] a sale by auction or private treaty of all tangible personal property of a
farmer or rancher previously used by him in carrying on his farming or ranching
operations. Unless said farmer or rancher is making or attempting to make full
and final disposition of all property used in his farming or ranching operations
and is abandoning the said operations on the premises whereon they were
previously conducted, such sale shall not be deemed a "farm close-out sale"
within the meaning of this article.
The commission Is an Inseparable part of the purchase price and therefore must be
included when calculating the sales tax.
5 The auctioneer may retain its commission, but the full amount of the sales tax must be
remitted to the owner.
6 •(4) The following shall be exempt from taxation under the provisions of parts 1 and 2 of this
article:
(a) All sales and purchases of livestock, all sales and purchases of live fish for stocking
purposes, and all farm
sales and the storage, use, or consumption of such
property;■
4

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April 13, 2011

§39-26-102(4), C.R.S.
Another exemption that auctioneers of motor vehicles may see is the exemption for non­
resident purchasers who will use and register the vehicle out-of-state. For example, an
auction of a motor vehicle to a purchaser who resides in Wyoming and who will use and
register the vehicle in Wyoming is exempt from state and all local sales and use taxes. 7
If an auctioneer conducts a sale of a motor vehicle for which the auctioneer must collect
sales tax (that is, the owner is not a duly licensed retailer and the sale is not exempt), then
the question arises as to what sales taxes must the auctioneer collect. When the sale is
conducted in Colorado and the purchaser is a resident of Colorado, then the auctioneer
must collect state sales tax. In addition, the auctioneer must collect local sales taxes (e.g.,
city and county sales tax) if the place of sale and the purchaser's residence are both in the
same local tax jurisdiction. For example, if the auction takes place at the auctioneer's place
of business in the city of Boulder and the purchaser resides in Boulder county but not the
city of Boulder, then the auctioneer must collect Boulder county tax because the place of
sale and purchaser's residence are both in Boulder county; but not collect city of Boulder
sales tax because only the place of auction is in the city of Boulder. The auctioneer will
also collect the Regional Transportation District (RTD), Scientific and Cultural Facilities
District (SC), and Metropolitan Football Stadium District (FD) sales taxes because both the
place of sale and the purchaser's residence are in these special districts. For more
information about the local taxes that must be collected by the seller of motor vehicles, see
Department FYI Sales 62, Guidelines For When To Collect State-Collected Local Sales
Taxes (enclosed).
b. Auctioneers must maintain records establishing that sales tax collection was not
required.

An auctioneer must exercise due diligence in determining whether a sale is exempt and
must maintain appropriate documentation of transactions for which the auctioneer was not
required to collect sales tax. The department will presume that an auctioneer has
exercised due diligence in establishing the farm close-out exemption if the auctioneer
obtains a written statement, signed by the farm or ranch owner or owner's agent, that
includes the following declarations: (1) the vehicle was used in the owner's farming or
ranching operation; the owner/owner's agent is (2) making or attempting to make full and
final disposition of all property used in his farming or ranching operations, and (3) is
abandoning the said operations on the premises whereon they were previously conducted;
and, if the statement is signed by the owner's agent, (4} a declaration that the agent has
personal knowledge of the facts supporting the statements or has confirmed with a person
who has such personal knowledge, that the forgoing statements are true. A copy of the
written statement must be given to the purchaser of the motor vehicle who will present It to
the county clerk when the vehicle is registered. The auctioneer must retain a copy of the
original statement for audit purposes for a period of three years.
39-26--113(5)(a), C.R.S. ("The sale of a new or used automobile to a purchaser who is a
nonresident of Colorado and who purchases such automobile for use outside this state is exempt
from an sales taxes, the collection of which is provided for by this section.")

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April 13, 2011

The department is considering proposing a regulation concerning the farm close-out sale
exemption. If the Colorado Auctioneer Association or any of its members are interested in
submitting comments, please send your request to be placed on the list of parties receiving
notices of rulemaking to Colorado Department of Revenue, Attn: Rick Miller, 1375 Sherman
Street, Denver, Colorado 80302 ([email protected]). Include your name,
mailing address, and email address with your request.

Miscellaneous
Pursuant to state law and department regulation 24-35-103.5, noted above, the Department
will make public a redacted version of this letter. Your letter requesting this general
information letter is not made public. 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 objection concerning the redacted letter.
I hope this is helpful. Please feel free to contact me if you have any questions.

Sincerely,

Office of Tax Policy
Colorado Department of Revenue

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