When a company sells custom signage to Colorado customers, are its separately stated charges for delivery and installation subject to Colorado sales or use tax?
Plain-English summary
An out-of-state company sells custom-made signage to Colorado customers. The signs are attached to a building or to a pole cemented into the ground, and they're delivered and installed by third parties. The company is licensed and registered in Colorado, separately states its delivery and installation charges on the invoice, and marks those charges up above what the third parties charge it. The question: do Colorado sales or use tax apply to the delivery and installation charges?
Colorado taxes the sale, use, storage, or consumption of tangible personal property — the sign itself — but not services. Delivery and installation are typically services, so the Department's general guidance is that those charges are not taxable, with two important conditions:
- They must be separately stated on the invoice; and
- The customer must not be required to buy delivery or installation from the company as a condition of buying the sign — i.e., the service is separable from the sale of the goods.
When both hold, tax is collected only on the price of the signage, not on the separately stated delivery and installation. But if the service is inseparable from the taxable sale, or the charge is not separately stated, the charge gets folded into the taxable price of the sign. (The fact that the company marks up the third-party delivery/installation charges doesn't, by itself, change this — what matters is separate statement and separability.)
The letter also flags a distinct issue it doesn't resolve: when a sign is attached to a building or set in a cemented pole, an installer can look like a construction contractor, and Colorado treats contractor jobs differently depending on whether the contract is lump-sum or time-and-material (Special Regulation SR 10(3)). That contractor wrinkle is left for the reader to work through with the contractor rules.
Because this is a General Information Letter, it's general guidance only and not binding on the Department.
What this means for you
Sign makers and sellers
To keep delivery and installation out of the taxable base, separately state them on the invoice and make them optional — don't condition the sign sale on buying your delivery/installation. Charge tax on the sign (the tangible personal property). Marking up the third-party delivery/install cost is fine; the markup itself doesn't make the charge taxable. But if you bundle delivery/installation into a single non-itemized price, or require the customer to take your installation, expect the whole amount to be taxable.
Installers who attach signs to buildings or poles
When you permanently attach a sign (bolted to a building, set in a cemented pole), you may be acting as a construction contractor, not just a retailer of a sign. Colorado's contractor rules — and the lump-sum vs. time-and-material distinction in SR 10(3) — can change who owes tax on what (materials vs. the customer charge). This GIL points to that issue without resolving it; analyze your contracts under the contractor rules.
Accountants and tax professionals
This is the recurring Colorado separately-stated + separable test for delivery/transportation/installation services (SR 18; Department Regulation §§ 39-26-102.7(a)(5), -102.12): service charges stay out of the taxable purchase price only when separately stated and not required as part of the taxable sale. The markup over third-party cost is a red herring. Flag the contractor-characterization fork (SR 10(3)) whenever the sign is affixed to real property — it can shift the analysis from "retail sale of a sign plus services" to a construction-contract framework.
Common questions
Q: Are delivery and installation charges for a sign taxable in Colorado?
A: Generally not, if they're separately stated on the invoice and the customer isn't required to buy delivery or installation from the seller as part of the sign purchase. Tax then applies only to the price of the sign. If the service is inseparable from the sale or isn't separately stated, the charge becomes taxable.
Q: We mark up the third-party delivery and install costs — does that make them taxable?
A: No. The markup by itself doesn't change the answer. What controls is whether the charges are separately stated and whether buying the service is required as part of the sale.
Q: The sign is bolted to a building or set in a cemented pole — does that matter?
A: It can. Permanently attaching a sign can make the installer a construction contractor, and Colorado taxes contractor jobs differently depending on whether the contract is lump-sum or time-and-material. This letter raises that issue but doesn't resolve it.
Q: Can I rely on this letter?
A: No. It's a General Information Letter — general guidance only, not binding on the Department, with no specific determination. Your facts may differ.
Q: Does this cover city sales tax?
A: No. The Department administers state and state-administered local taxes only. Colorado's self-collected home-rule cities (and home-rule counties) set their own rules. Check with each local jurisdiction.
Citations and references
Statutes and rules:
- § 39-26-104, C.R.S. (sales and use tax on tangible personal property, not services)
- 1 CCR 201-5, Special Regulation SR 18 (Transportation Charges)
- Department Regulation § 39-26-102.7(a)(5) (charges included in / excluded from the purchase price)
- Department Regulation § 39-26-102.12 (purchase price)
- 1 CCR 201-5, Special Regulation SR 10(3) (Contractors; lump-sum vs. time-and-material contracts)
Source
- Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
- Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-18-003.pdf
Original ruling text
Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]
GIL-18-003
January 30, 2018
XXXXXXXXXXXXXX
Attn: XXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
Re: Tax on Signage
Dear XXXXXXXXXX,
You submitted on behalf of your client (“Company”) a request for guidance relating to the
applicability of sales and use tax to various charges for the sale, delivery, and installation
of signage.
The Colorado Department of Revenue (“Department”) issues general information letters
and private letter rulings. A general information letter provides a general overview of the
relevant tax issues, but 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 on
the taxpayer, and requires payment of a fee. For more information about general
information letters and private letter rulings, please see Department Rule 1 CCR 201-1,
24-35-103.5.
The Department treats this request as a general information letter. It is important to remember
that general information letters, such as this one, are general discussions of tax law and are
not binding on the Department. If Company would like the Department to issue a private letter
ruling on the issue raised here, Company can submit a request and pay the fee in compliance
with Department Rule 1 CCR 201-1, 24-35-103.5.
Issue
Does sales or use tax apply to charges for delivery and installation?
Background
Company, which is located outside Colorado, sells custom-made signage to customers
located in Colorado. The signage is attached either to a building or to a pole that is
cemented into the ground. The signage is delivered and installed by third parties.
Company is registered to do business and holds a sales tax license in Colorado.
Company’s charges for delivery and installation are separately stated on the invoice and
these charges are higher than what the third-parties charge the Company.
Discussion
Colorado levies sales and use tax on the sale, use, storage, or consumption of tangible
personal property but not on services.1 Delivery and installation are typically classified as
services and, therefore, the charges for these services are not taxable, unless the
provision of the service is inseparable from the sale of the taxable goods or the charge for
the service is not separately stated.2 Tax is collected only on the price paid by the
customer3 for the signage and not on the delivery or installation charges if those charges
are separately stated and the customer is not required to purchase delivery or installation
services from Company as part of the sale of signage.
Colorado administers sales tax for special districts (e.g., the Regional Transportation
Authority), most Colorado counties, and certain cities. The sales taxes of some counties
and cities (known as home-rule cities and counties) are not administered by the state of
Colorado. The Department does not administer the use tax for any local tax jurisdictions
except special districts. For a list of local tax jurisdictions administered by the
Department, see Department Form DR 1002 on Colorado Sales/Use Tax Rates.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are
knowledgeable on state taxes issues. However, the Department does not make a
specific determination here on any of the issues raised and the Department is not bound
by this general information letter.
The Department administers state and state-administered local sales and use taxes. This
letter does not address sales and use taxes administered by home-rule cities and home-rule
counties. You may wish to consult with local governments which administer their own sales or
use taxes about the applicability of those taxes. Visit our web site at www.colorado.gov/tax
for more information about state and local sales taxes.
Enclosed is a redacted version of this letter. Pursuant to statute and regulation, this redacted
letter 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 letter.
Sincerely,
Office of Tax Policy
Colorado Department of Revenue
1 §39-26-104, C.R.S.
2 See Special Regulation 1 C.C.R. 201-5: SR 18 (Transportation Charges), and Department
Regulation §§ 39-26-102.7(a)(5), -102.12.
3 See Special Regulation 1 C.C.R. 201-5: SR 10(3) (Contractors) for lump sum v. time-and-
material contracts.
2
DR 4010A (06/11/14)