Must a Colorado estate-sale company collect sales tax when selling clients' motor vehicles?

Plain-English summary

A Colorado estate-sale company's duty to collect sales tax on a client's vehicle depends on its dealer status and how the vehicle is sold, according to this nonbinding Department guidance.

If the company is a licensed auto dealer or must hold an auto-dealer license, it must collect sales tax on all vehicle sales. If it is not licensed and need not be licensed, it need not collect sales tax on a motor vehicle sold at a qualifying auction sale. It must still collect on vehicles sold by other methods.

The letter defines an auction sale as one where an auctioneer solicits offers until the highest offer is made. It also says motor-vehicle auctioning must be incidental to the auctioneer's primary business of auctioning goods. Merely conducting an estate sale does not establish that the vehicle was auctioned.

What this means for you

Estate-sale companies

Record whether a vehicle was actually sold through bidding at auction or through another sale method. Dealer licensing status also changes the collection duty.

Auctioneers and accountants

The letter discusses who must collect tax; it does not announce that every qualifying auction vehicle is tax free. It gives general guidance and makes no binding determination for the requester.

Common questions

Q: Does an estate-sale company always collect tax on vehicles it sells?
A: Not always. A qualifying auctioneer who is not required to hold an auto-dealer license does not collect it on vehicles sold at qualifying auctions under this letter.

Q: What if the vehicle is sold at a fixed price?
A: The letter requires collection on motor vehicles sold by methods other than a qualifying auction.

Q: Does being an auto dealer change the rule?
A: Yes. A licensed or license-required auto dealer must collect on all motor-vehicle sales.

Citations and references

• §§ 39-26-105 and 39-26-106(2)(a), C.R.S. (retailer collection).
• § 39-26-113(7)(a) and (b), C.R.S. (auctioneer collection rule).
• § 39-26-102(1.3), C.R.S.; 1 CCR 201-4, Reg. 39-26-102(1.3)(1)(a)(i) (auction sale).
• § 44-20-102(17) and (18)(f), C.R.S. (dealer and auctioneer definitions).

Source

• Official index: Colorado All Letter Rulings.
• Original PDF: GIL-19-002.pdf, dated November 27, 2019.

Original ruling text

Physical Address: Mailing Address:
Office of Tax Policy Analysis Office of Tax Policy Analysis, Room 607 1375 Sherman Street, Room 607 P.O. Box 17087
Denver, CO 80203
Denver, CO 80217-0087

GIL 19-002

November 27, 2019

XXXXXXXXXXX
XXXXXXXXXXX
XXXXXXXXXXX

Re: Vehicles Sold at Estate Sales

Dear XXXXXXX,

You submitted, on behalf of XXXXXXXX (“Company”), a request for a general information letter on the collection of sales tax on motor vehicles sales.

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 1 CCR 201-1, Regulation 24-35-103.5.

Issue

We frame your question as follows: Is a company that facilitates the sale of property owned by its clients at sales conducted at its clients’ homes required to collect sales tax on motor vehicles sold?

Background

Company’s business activity consists primarily of selling the contents of clients’ homes.
Company typically holds a three-day sale open to the general public. Company does not take ownership of any personal property during the sale, but sells items on behalf of their clients, collecting a commission on all items sold. Company collects sales tax on all items sold. Occasionally, a client will include a motor vehicle among the items for sale.

Discussion

Colorado law requires that a retailer of tangible personal property collect sales tax from the buyer.1 A retailer’s agent may be treated as jointly liable with the retailer for the collection and payment of sales tax if he or she operates under the retailer’s direction, obtains tangible personal property from the retailer to sell on the retailer’s behalf, or solicits 1
§§ 39-26-105, 106(2)(a), C.R.S.

Page 2

GIL 19-002
Page 2
business on behalf of the retailer.2

However, an auctioneer is not required to collect sales tax on motor vehicles sold at an auction sale if the auctioneer is not a licensed auto dealer.3 An auction sale is a sale conducted by an auctioneer who solicits offers to purchase tangible personal property or services until the highest offer is made.4

An auctioneer is generally not required to obtain an auto dealer’s license if the auctioneer is engaged in the business of offering to sell, or selling, used motor vehicles owned by persons other than the auctioneer at public auction only.5 Any auctioning of motor vehicles by an auctioneer must be incidental to the primary business of auctioning goods.6

If Company is a licensed auto dealer or is required to obtain an auto dealer’s license, Company is required to collect sales tax on all sales of motor vehicles. If Company is not a licensed auto dealer and is not required to obtain an auto dealer’s license, Company is not required to collect sales tax on motor vehicles sold at auction sales as defined above, but is required to collect sales tax on any motor vehicle sold by methods other than an auction sale.

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 self-collected home-rule cities. 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.

Sincerely,

Office of Tax Policy Analysis
Colorado Department of Revenue

2
§ 39-26-103(9)(e), C.R.S.
3
§ 39-26-113(7)(a) and (b), C.R.S.
4
1 CCR 201-4, Regulation 39-26-102(1.3)(1)(a)(i);and § 39-26-102(1.3), C.R.S.
5
§ 44-20-102(17) and (18)(f), C.R.S.
6
§ 44-20-102(17), C.R.S.