Does electricity used in an apartment complex's common areas — pools, gyms, yoga rooms, clubhouses — qualify for Colorado's residential-energy sales-tax exemption?

Plain-English summary

Colorado charges sales tax on electricity used commercially, but exempts electricity sold for residential use. Someone asked the Department where the line falls in an apartment complex: does the electricity powering shared amenities — the swimming pool, the on-site fitness center, the yoga room, the clubhouse — get the residential exemption?

The Department's answer: no. The exemption is defined narrowly. "Residential use" means electricity used for domestic purposes in a residence, and for this exemption a "residence" is a separate dwelling in a multi-unit apartment — i.e., the individual apartment units. The statute's definition does not reach any area of the building other than those separate dwellings. So electricity feeding common areas and shared amenities falls outside the exemption and is taxable.

The split is clean: power consumed inside the individual apartments can qualify as exempt residential use; power consumed in the building's shared spaces is taxable commercial consumption.

What this means for you

Apartment owners and property managers

If a utility account or sub-meter covers common areas — pools, gyms, clubhouses, leasing offices, hallways, shared laundry, amenity spaces — expect that electricity to be taxable. Only the electricity used within the separate dwelling units is eligible for the residential exemption. If a single meter mixes dwelling and common-area use, you may need to allocate, and you should confirm how your utility and the Department treat the account.

Utilities and billing departments

The exemption hinges on the statutory definition of "residence" as the separate dwelling, not the property as a whole. Common-area load on a master meter is commercial for exemption purposes even though the building is residential in character.

Accountants and tax professionals

This is a definitional ruling: § 39-26-715(1)(a)(II)(B) confines "residence" to the separate dwelling, so § 39-26-715(1)(a)(II)(C) "residential use" can't extend to shared amenity areas. Remember the local-option layer — state-administered cities and counties may separately exempt residential energy under § 29-2-105(1)(d)(I)(B); check Department publication DR 1002. And because this is a GIL, it isn't binding even on the Department.

Common questions

Q: Is apartment-complex electricity exempt from Colorado sales tax?
A: Only the part used inside the individual dwelling units. Electricity for shared common areas — pools, fitness centers, yoga rooms, clubhouses — is taxable, because the residential exemption is limited to the separate dwellings.

Q: Why doesn't the whole residential building qualify?
A: The exemption defines a "residence" as a separate dwelling in a multi-unit apartment. The definition doesn't include other areas of the building, so common-area electricity falls outside it.

Q: Does this apply to gas as well as electricity?
A: This letter addresses the electricity question that was asked. The residential-energy exemption framework and the DR 1002 local-option listing cover gas, electricity, and other specified fuels, but check the specific provisions and your jurisdiction.

Q: Can I rely on this letter for my property?
A: Not as binding authority. A General Information Letter is general guidance only and is not binding on the Department; it represents the good-faith opinion of Department personnel. It's a strong signal of how the Department reads the exemption, but your facts may differ.

Q: Does this cover city tax too?
A: No. The Department administers state and state-administered local sales and use tax only. Self-collected home-rule cities set their own rules, and state-administered cities/counties may or may not adopt the residential exemption (see DR 1002). Check your jurisdiction.

Citations and references

Statutes and rules:
- § 39-26-104(1)(d.1), C.R.S. (sales tax on commercial consumption of electricity)
- § 39-26-715(1)(a)(II), C.R.S. (exemption for electricity sold for residential use)
- § 39-26-715(1)(a)(II)(B), C.R.S. ("residence" = a separate dwelling in a multi-unit apartment)
- § 39-26-715(1)(a)(II)(C), C.R.S. (definition of "residential use")
- § 29-2-105(1)(d)(I)(B), C.R.S. (local option to exempt residential energy; see DR 1002)

Subject

Sales Tax Exemption for Residential Energy Use

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-21-001.pdf

Original ruling text

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

GIL 21-001
January 20, 2021
XXXXXXXXXX
Via Electronic Mail: XXXXXXXXXX
Re: Sales Tax Exemption for Residential Energy Use
Dear XXXXXXXXXX:
You submitted a request for a general information letter regarding the sales tax exemption for
residential energy use. 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, and
requires payment of a fee. For more information about general information letters and private
letter rulings, please see 1 CCR 201-1, Rule 24-35-103.5.
Issue
Does the use of electricity in common areas, such as swimming pools, onsite fitness centers,
yoga rooms, and clubhouses, in apartment complexes qualify for the sales tax exemption
authorized by section 39-26-715(1)(a)(II), C.R.S., for residential energy use?
Discussion
Colorado imposes sales tax on commercial consumption of electricity,1 but exempts electricity
sold for residential use.2 “Residential use” that qualifies for exemption is defined, in pertinent
part, as “the use of electricity … for domestic purposes, including powering [various] domestic
items that require power … in a residence.”3 For the purpose of the exemption, the statute
defines a “residence,” in pertinent part, as “a separate dwelling in a multi-unit apartment.”4 The
statutory definition of “residence,” for the purpose of the exemption does not include any areas
in a multi-unit apartment other than the separate dwellings therein and the exemption therefore
does not apply to electricity used in any such areas.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are knowledgeable
1

§ 39-26-104(1)(d.1), C.R.S.
§ 39-26-715(1)(a)(II), C.R.S. State-administered cities and counties also have the option to exempt electricity sold
for residential use. § 29-2-105(1)(d)(I)(B), C.R.S. Refer to Department publication DR 1002 for a listing of
jurisdictions that exempt gas, electricity, and other specified fuels for residential use.
3
§ 39-26-715(1)(a)(II)(C), C.R.S.
4
§ 39-26-715(1)(a)(II)(B), C.R.S.
2

GIL 21-001
January 20, 2021
Page 2

on state taxes issues. However, the Department does not make a specific determination 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 those local governments that administer their own sales or use taxes about
the applicability of those taxes. Visit our website at tax.colorado.gov for more information about
state and local sales taxes.
Sincerely,

Office of Tax Policy Analysis
Colorado Department of Revenue