How does Colorado tax monthly newspapers and electronically delivered newspapers and magazines?

Plain-English summary

Colorado’s Department of Revenue addressed monthly newspapers, electronically delivered newspapers, and electronically delivered magazines. It said a newspaper is exempt only when it qualifies as a legal publication under the statutory frequency classifications. A monthly newspaper does not qualify, so it is subject to sales and use tax.

The Department also treated electronic delivery as irrelevant to that result. It reasoned that a digital newspaper exists in the physical world and is no less taxable than the paper version. The same reasoning made electronically delivered magazines taxable because magazines are tangible personal property and do not receive the legal-publication exclusion.

What this means for you

Publishers and digital-content businesses

A monthly newspaper does not receive the legal-publication exclusion described in the letter merely because it is delivered electronically. Electronically delivered magazines are taxable under the same guidance.

Newspaper businesses

Check the publication’s distribution frequency against § 24-70-102. The letter describes daily, tri-weekly, semi-weekly, and weekly classifications as legal publications; it says a monthly newspaper falls outside those classifications.

Accountants and tax professionals

The Department acknowledged that the tax treatment of digital goods was complex and unsettled, then applied the statutes it had. This is a 2011 General Information Letter, so later law and policy should be checked before relying on it.

Common questions

Q: Are all newspapers taxable?
A: No. The letter says newspapers that qualify as legal publications are excluded from tangible personal property and therefore exempt. It says monthly newspapers do not qualify under the listed frequency classifications.

Q: Does electronic delivery change the result?
A: No. The Department treated electronically delivered monthly newspapers as taxable and reached the same result for electronically delivered magazines.

Q: Does the letter bind the Department today?
A: No. It is a General Information Letter and is not binding. The letter itself recognized that the digital-goods issue was complex and unsettled.

Q: Does it cover self-collected home-rule taxes?
A: No. The letter addresses state and state-administered taxes. Self-collected home-rule jurisdictions may impose their own taxes.

Citations and references

• § 39-26-104(1) and 202, C.R.S. (sales and use tax)
• § 39-26-102(15), C.R.S. (tangible personal property and legal-publication exclusion)
• § 24-70-102, C.R.S. (legal-publication newspaper classifications)
• Department regulation 24-35-103.5 (GIL and private letter ruling procedure)

Source

• Landing page: https://tax.colorado.gov/all-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/default/files/documents/GIL_11-014.pdf

Original ruling text

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

GIL-11-014
July 29, 2011
XXXXXXXXXXXXXXXX
ATTN: XXXXXXXXXXX
XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX

Re: Electronically Delivered Newspapers
Dear XXXXXXXX,
You submitted on behalf of XXXXXXXXXXXXXXXXXXXX (“Company”) a request for guidance on the collection of sales and use tax on electronically delivered newspapers. The department issues general information letters and private letter rulings. A general information letter provides a general overview of the relevant tax issues and is not binding on the department. A private letter ruling provides a specific determination for a specific set of facts, is binding on the department but not the taxpayer, and requires payment of a fee. For more information about general information letters and private letter rulings, please see Department regulation 24-35-103.5 at www.taxcolorado.org > FYI/Publication > Rulings. The department initially treats your request as one of a general information letter. If you would like the department to issue a private letter ruling on the issues you raise, you can resubmit a request and fee in compliance with regulation 24-35-103.5. 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 action or inaction.

Issue

1. Are newspapers published monthly subject to sales tax?
2. Are newspapers delivered electronically subject to sales tax?
3. Are magazines delivered electronically subject to sales tax?

Background
Company is a supplier of tax compliance software and is inquiring into the taxability of newspapers delivered electronically. Discussion

1. Monthly newspapers are subject to sales tax.
   Colorado imposes sales or use tax on the sale, use, storage or consumption of “tangible personal property.” Tangible personal property is defined as corporeal personal property. Newspapers are corporeal personal property and, therefore, would ordinarily qualify as tangible personal property. However, Colorado law expressly excludes newspapers that qualify as a “legal publication” from the definition of tangible personal property.1 As such, qualifying newspapers are exempt from sales and use tax. The statute defining a “legal publication” sets forth a list of qualifying newspapers, which are generally classified by the frequency of distribution (e.g., daily, five days a week, etc.). Section §24-70-102 lists the following newspapers as legal publications: “Every newspaper printed and published daily, or daily except Sundays and legal holidays, or which shall be printed and published on each of any five days in every week excepting legal holidays and including or excluding Sundays, shall be considered and held to be a daily newspaper; every newspaper printed and published at regular intervals three times each week shall be considered and held to be a tri-weekly newspaper; every newspaper printed and published at regular intervals twice weekly shall be considered and held to be a semi-weekly newspaper; and every newspaper printed and published at regular intervals once a week shall be considered and held to be a weekly newspaper.” A newspaper distributed monthly does not qualify as a “legal publication” and, consequently, is not exempt from Colorado sales and use taxes.
2. Monthly newspapers delivered electronically are subject to sales tax.
   Newspapers that do not qualify as a legal publication are not exempt from sales and use tax, regardless of whether they are delivered electronically. As we noted above, Colorado levies sales and use tax on the sale, use, storage, or consumption of tangible personal property.2 Intangible personal property is conceptual in nature, such as a contract, stock, and goodwill.3 When we speak of digital goods, we are referring not to a concept but, rather, to something that exists in the physical world. Just as a digital song or digital photograph stored and played or displayed on an electronic device is physical property that is perceptible by the senses, so is a newspaper electronically delivered part of the physical world.

1

“Tangible personal property means corporeal personal property. The term shall not be construed to include newspapers, as legally defined by section 24-70-102, C.R.S., preprinted newspaper supplements…” §39-26102(15), C.R.S.

2 See, generally, 39-26-104(1) and 202, C.R.S.
3 Ibid.

2

We acknowledge that this is a complex and unsettled area of tax. Indeed, the department’s view of electronically delivered software has varied over the years. In the absence of clear legislative direction on this issue, the department must evaluate this issue in light of existing statutes. We are persuaded that digital documents, as is true of digital photographs, music, books, movies, and newspapers have a physical existence and are no less taxable than had they been delivered in paper or celluloid form. A number of states that have addressed this issue have reached similar conclusions. See, e.g., Arizona Private Taxpayer Ruling LR05-010, 09/26/2005; Wisconsin Sales and Use Tax Report No. 1-09, 03/01/2009 (describing statutory changes that impose sales tax on certain digital goods); Robert Smith Flipflopfoto 116 S. 8th Street Opelika, AL 36801-4914, Taxpayer, v. State of Alabama Department of Revenue., S. 05-1240, 11/17/2006 (digital photographs are tangible personal property subject to sales tax; Texas Policy Letter Ruling No. 200101966L, 01/03/2001 (digital photographs are tangible personal property); Washington Other Official Material / Digital Products March 3, 2010 (electronically downloaded digital products are taxable tangible personal property).

3. Magazines delivered electronically are subject to sales tax.
   Unlike qualifying newspapers which are expressly excluded from the definition of tangible personal property, magazines are tangible personal property.4 For the reasons discussed above, electronically delivered magazines are tangible personal property and subject to sales tax. 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

4 1 CCR 201 5 Special Regulations for Specific Businesses SR-32 Newspapers, Magazines and Other

Publications,

3