Does an out-of-state seller with no Colorado location have to collect Colorado sales tax on prefabricated homes, and how much of the price is taxable?

Plain-English summary

A company that sells prefabricated housing built outside Colorado asked two practical questions: does it have to collect Colorado sales tax when it has no office, warehouse, or other place of business in Colorado and the customer arranges their own third-party shipping? And how is prefab housing taxed at all? The Department addressed both.

Do you have to collect? Usually yes, if you have economic nexus. Any retailer "doing business in Colorado" must collect state and state-administered local sales tax. You're doing business here if you sell and deliver goods into Colorado and have economic nexus — which kicks in once you make more than $100,000 in Colorado retail sales (in the prior calendar year, or after crossing $100,000 during the current year). Crucially, not having a physical location in Colorado doesn't get you out of it. And letting the customer hire the shipper doesn't move the sale out of state: a sale is sourced to where the buyer receives the property, and "receive" does not include a shipping company taking possession on the buyer's behalf. So if the buyer receives the home in Colorado, the sale is a Colorado sale.

How much is taxable? Colorado gives prefab housing a big break. By statute, 48% of the purchase price of prefabricated housing is exempt from state sales tax (so tax applies to the remaining 52%). Any subsequent sale of the prefab housing is fully exempt from state use tax. These exemptions also flow through to state-administered local sales taxes.

What this means for you

Out-of-state prefab and manufactured-housing sellers

A "we have no Colorado location" position will not, by itself, free you from collecting Colorado tax. Once your Colorado sales exceed $100,000, you have economic nexus and must register and collect. Having the customer arrange shipping doesn't change the sourcing — if they receive the home in Colorado, it's a Colorado sale. The upside: only 52% of the price is subject to state (and state-administered local) sales tax, because 48% is exempt.

Buyers of prefabricated homes

Expect Colorado state (and state-administered local) sales tax on 52% of the price, not the full price. A later resale of the home is fully exempt from state use tax. Watch for separately administered home-rule city taxes, which this letter doesn't cover.

Accountants and tax professionals

Two independent issues: (1) collection duty turns on economic nexus under § 39-26-102(3)(c) (the $100,000 threshold, prior-year or current-year trigger) and destination sourcing under § 39-26-104(3) (receipt by the buyer's own carrier ≠ receipt by the buyer that moves the situs); (2) the prefab-housing partial exemption under § 39-26-721 (48% off the sales-tax base; full use-tax exemption on resale; § 39-26-208 for use tax), flowing to state-administered locals, with local-option treatment per § 29-2-105(1)(d). As a GIL, it isn't binding.

Common questions

Q: I have no office or warehouse in Colorado. Do I still collect Colorado sales tax?
A: If you have economic nexus — generally more than $100,000 in Colorado retail sales — yes. Lacking a physical presence in Colorado does not exempt a remote seller from collecting.

Q: The customer arranges their own shipping. Does that move the sale out of Colorado?
A: No. The sale is sourced to where the buyer receives the property, and a shipping company holding it on the buyer's behalf doesn't count as the buyer receiving it. If the buyer receives the home in Colorado, it's a Colorado sale.

Q: Is prefabricated housing fully taxable?
A: No. Colorado exempts 48% of the purchase price from state sales tax, so tax applies to the remaining 52%. The exemption also applies to state-administered local sales taxes.

Q: What about tax when the home is later resold?
A: Any subsequent sale of the prefabricated housing is fully exempt from state use tax.

Q: Can I rely on this letter?
A: Not as binding authority. A General Information Letter is general guidance only, not binding on the Department, and represents the good-faith opinion of Department personnel. For a binding answer on your facts, request a private letter ruling.

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. Check each jurisdiction (and DR 1002 for local-option treatment).

Citations and references

Statutes and rules:
- § 39-26-105(1)(a), C.R.S. (retailer's duty to collect state and state-administered local sales tax)
- § 39-26-102(3)(c), C.R.S. (economic nexus; "doing business in Colorado"; $100,000 threshold)
- § 39-26-104(3), C.R.S. (sourcing a sale to where the buyer receives the property)
- § 39-26-721, C.R.S. (prefabricated housing; 48% sales-tax exemption; resale use-tax exemption)
- § 39-26-208, C.R.S. (use tax on prefabricated housing)
- § 29-2-105(1)(d), C.R.S. (local-option treatment of state exemptions)
- 1 CCR 201-4, Rule 39-26-102(3) (economic nexus)

Subject

Prefabricated Housing Manufactured Outside Colorado

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-21-003.pdf

Original ruling text

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

GIL 21-003
June 28, 2021
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Re: Prefabricated Housing Manufactured Outside Colorado
Dear XXXXXXXXXX:
You submitted a request for a general information letter regarding sales tax collection on the sale of
prefabricated housing by your company, XXXXXXXXXX (“Company”). 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
Is Company required to collect sales tax on the sale of prefabricated housing manufactured outside of
Colorado if it does not have an office, distribution facility, salesroom, warehouse, storage place or other
similar place of business in Colorado and customers arrange for their own third-party shipping?
Discussion
Every retailer doing business in Colorado is responsible for the collection and payment of state and stateadministered local sales tax for all retail sales made in Colorado.1 A retailer is “doing business in
Colorado” if the retailer sells, leases, or delivers tangible personal property into Colorado and has the
requisite economic nexus.2 A retailer has economic nexus with Colorado for the entire calendar year if the
retailer made more than $100,000 in retail sales in Colorado in the preceding calendar year. 3
A retail sale is considered to be made in Colorado if it is sourced to Colorado in accordance with
Colorado law.4 A retail sale is generally sourced to the location where the purchaser receives the
property.5 The term “receive” does not include possession by a shipping company on behalf of the
1 Sections 39-26-105(1)(a) and 39-26-106(2), C.R.S.
2 Section 39-26-102(3)(c), C.R.S.

A retailer is also doing business in Colorado if the retailer transacts business by
maintaining in Colorado, directly or indirectly, or by a subsidiary, an office, distribution facility, salesroom, warehouse,
storage place, or other similar place of business, including the employment of a Colorado resident who works from a
home office in Colorado. Id. at (3)(a).
3 Section 39-26-102(3)(c), C.R.S.; see also 1 CCR 201-4, Rule 39-26-102(3). A retailer also has economic nexus
with Colorado on and after the first day of the month after the 90 th day the retailer has made in excess of $100,000 in
retail sales in Colorado regardless of the prior year’s sales. Section 39-26-102(3)(c)(I)(B), C.R.S.
4 Section 39-26-104(3), C.R.S.
5 See section 39-26-104(3)(a), C.R.S.

GIL 21-003
June 28, 2021
Page 2
purchaser.6 If the property is delivered to the purchaser at a location other than the seller’s business
location, the sale is sourced to the location the purchaser receives the purchased property. 7
Colorado statute details the application of sale and use tax to prefabricated housing.8 The statute
exempts 48% of the purchase price of prefabricated housing from state sales tax.9 Any subsequent sale
is fully exempt from state use tax.10 These exemptions also apply to state-administered local sales
taxes.11
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 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

6 Section 39-26-104(3)(a) and (d)(II), C.R.S.
7 Section 39-26-104(3)(a)(II) and (d)(II), C.R.S.
8 Sections 39-26-721 and 39-26-208, C.R.S.
9 Section 39-26-721(1), C.R.S.
10 Section 39-26-721(2), C.R.S.
11 See section 29-2-105(1)(d), C.R.S. (listing the exemptions from state sales tax that are subject to local option at the

city and county level).