Is propane (liquefied petroleum gas) sold to heat or cook in RVs, cabins, or tents at a campground subject to Colorado sales tax — and when does the special fuel tax or the residential-use exemption apply?

Plain-English summary

A business asked the Colorado Department of Revenue how tax applies to liquefied petroleum gas (LPG, i.e., propane) sold and used at a campground. Because this is a General Information Letter, the Department gives general guidance rather than a binding determination, but the principles are clear.

Propane to heat or cook at a campground is taxable. Colorado taxes retail sales of tangible personal property, and propane is tangible personal property. There's an exemption for gas used for residential use — domestic purposes in a residence (a separate dwelling in an apartment, condo, townhouse, mobile-home park, or a single-unit dwelling). But RVs, cabins, and tents at a campground are not residences. They're temporary accommodations, like hotels and motels. Just as gas a hotel buys to heat or light its rooms is taxable commercial consumption, propane sold for heating or cooking in campground RVs, cabins, or tents is commercial, not residential — so it's subject to sales tax.

Propane bought for resale isn't taxed at purchase — but watch self-use. A sale to a retail merchant for resale is a wholesale sale, which isn't subject to sales or use tax. However, if a retailer takes some of that wholesale propane for its own use (for example, to heat cabins it furnishes to guests or for its own operations), the retailer must remit use tax on the purchase price of the amount it uses. (The Department cites IBM v. Charnes: an inventory withdrawal for your own use triggers a belated recognition that the earlier "wholesale" purchase was really a retail, taxable one.)

Special fuel tax is only for propulsion. Colorado imposes a gasoline and special fuel tax on LPG used to propel a motor vehicle on the highways. Propane sold for retail use that is not used to propel a motor vehicle — propane for heating and cooking — is not subject to the gasoline and special fuel tax.

What this means for you

Campground and RV-park operators

Propane you sell or provide for heating and cooking in RVs, cabins, or tents is taxable commercial use, not exempt residential use — charge sales tax on those sales. If you furnish cabins or tents to guests and use propane yourself for that, or for your general operations, and you pulled that propane from resale inventory you bought tax-free, you owe use tax on what you consume. The residential-use exemption won't cover campground accommodations.

Propane and LPG dealers

Selling to another retailer for resale is a non-taxable wholesale sale; selling to an end user for heating/cooking is a taxable retail sale. Keep the two straight, and remember that any propane you withdraw from resale inventory for your own use becomes subject to use tax. The special fuel (motor-fuel) tax is a separate regime that only bites when LPG propels a vehicle on the highway — note there are additional registration/reporting requirements for selling LPG at retail as a motor fuel.

Accountants and tax professionals

The residential-use exemption (§ 39-26-715) hinges on the statutory definition of "residence," which excludes temporary accommodations; Special Rule 22 supplies the hotel/motel commercial-consumption analogy. The wholesale-vs-retail line and the inventory-withdrawal use-tax trigger (IBM v. Charnes, 601 P.2d 622) govern resale propane. The special fuel tax under § 39-27-102 applies only to propulsion. Because this is a GIL, it is not binding on the Department — treat it as guidance, not authority, and watch the home-rule-city caveat.

Common questions

Q: Is propane sold at a campground taxable in Colorado?
A: Yes. Propane sold to heat or cook in RVs, cabins, or tents at a campground is taxable commercial use. These are temporary accommodations like hotels, not residences, so the residential-use exemption doesn't apply.

Q: When is propane exempt as residential use?
A: Only when the gas is used for domestic purposes in an actual residence — a separate dwelling such as a single-unit home or a unit in an apartment, condo, townhouse, or mobile-home park. Campground RVs, cabins, and tents don't qualify.

Q: Do I owe tax on propane I buy for resale?
A: A purchase for resale is a non-taxable wholesale sale. But if you use some of that propane yourself — say, to heat cabins you furnish to guests or for your own operations — you owe use tax on the price of the amount you use.

Q: When does the special fuel (motor-fuel) tax apply to propane?
A: Only when the LPG is used to propel a motor vehicle on Colorado highways. Propane sold for heating or cooking, not propulsion, isn't subject to the gasoline and special fuel tax.

Q: Can I rely on this letter for my own situation?
A: Not as binding authority. A General Information Letter is general guidance only and is not binding on the Department; it reflects the good-faith opinion of Department personnel and makes no specific determination. It also doesn't address self-collected home-rule city taxes — check with each city.

Citations and references

Statutes and rules:
- § 39-26-104(1)(a), C.R.S. (imposition of sales tax on retail sales)
- § 39-26-102(15)(a)(I), C.R.S. (definition of "tangible personal property")
- § 39-26-715(1)(a)(II), C.R.S. (residential-use exemption; definitions of "residential use" and "residence")
- § 39-26-202, § 39-26-204(1), C.R.S. (use tax)
- § 39-26-102(9), (19)(a), C.R.S. (retail sale; wholesale sale)
- § 39-27-102(1)(a)(I)(B), (C), C.R.S. (special fuel tax on LPG used to propel a motor vehicle); see also § 39-27-104(5), C.R.S.
- 1 CCR 201-5, Special Rule 22 (gas for heating/lighting hotel and motel rooms is commercial and taxable)
- 1 CCR 201-4, Rule 39-26-102(11) (definition of "auto camp")
- 1 CCR 201-1, Rule 24-35-103.5 (general information letter and private letter ruling procedure)

Case law:
- IBM v. Charnes, 601 P.2d 622 (Colo. 1979) (inventory withdrawal for own use triggers use tax)

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-23-003.pdf

Original ruling text

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

GIL 23-003
August 3, 2023
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Via Electronic Mail: XXXXXXXXXXXXX
Re: Taxability of Liquefied Petroleum Gas
Dear XXXXXXXXXX,
You submitted a request for a general information letter regarding the taxability of liquefied
petroleum gas. 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
1. Whether liquefied petroleum gas sold to heat or cook in recreational vehicles (not for
propulsion), cabins, or tents at campsites is subject to sales tax.
2. Whether liquefied petroleum gas sold for use in recreational vehicles, cabins, or tents at
campsite is subject to gasoline and special fuel tax.
3. Whether liquefied petroleum gas purchased for resale is subject to sales and use tax.
4. Whether liquefied petroleum gas purchased for resale is subject to gasoline and special fuel
tax.
5. Whether liquefied petroleum gas purchased for heating and cooking in cabins and tents
furnished by taxpayer to guests, or for use in taxpayer’s normal business operations, is subject
to sales and use or gasoline and special fuel tax.

GIL 23-003
August 3, 2023
Page 2

Discussion
Colorado imposes a sales tax on all sales and purchases of tangible personal property at retail,
unless an exemption applies.1 Tangible personal property means a commodity that is dealt in
and capable of being possessed and exchanged.2 Liquefied petroleum gas is tangible personal
property because it is a commodity that is capable of being possessed and exchanged.
Gas purchased for residential use is exempt from Colorado sales and use tax.3 Residential use
is defined as “the use of … gas, … for domestic purposes…in a residence.”4 A residence is “a
separate dwelling in a multi-unit apartment, condominium, townhouse, or mobile trailer home
park, or a separate single-unit dwelling….”5 The sale of liquefied petroleum gas by an auto
camp6 to the owner of a recreational vehicle is not within the definition of residential use.
Likewise, cabins and tents are not residences. Instead, they are temporary accommodations,
like hotels and motels. Gas is subject to Colorado sales tax when purchased at retail by a hotel
or motel operator for heating or lighting rooms because such consumption is commercial
consumption, not residential.7 The same principle regarding the purchase of gas at retail for
heating or lighting hotel or motel rooms applies to purchases or uses by businesses offering
similar temporary accommodations.
As discussed above, Colorado imposes sales tax on retail sales of liquefied petroleum gas.8
When a person uses, stores, or consumes tangible personal property in this state that was
purchased at retail without the payment of tax, the person must file a return and pay the state
use tax.9 A retail sale includes all sales except wholesale sales.10 A wholesale sale means a
sale by wholesalers to retail merchants for resale.11 If the retail merchant uses a portion of the
wholesale liquefied petroleum gas for the retail merchant’s own use, then the retail merchant
must remit use tax to the Department on purchase price paid for the amount of gas used.12
Colorado imposes a special fuel tax on any liquefied petroleum gas, including propane, used to
propel a motor vehicle on the highways of this state.13 Liquefied petroleum gas that is sold for
retail use, and not to propel a motor vehicle, is not subject to the gasoline and special fuel tax.14

1 Section 39-26-104(1)(a), C.R.S.
2 Section 39-26-102(15)(a)(I), C.R.S.; paragraph (1) of 1 CCR 201-4, Rule 39-26-102(15).
3 Section 39-26-715(1)(a)(II), C.R.S.
4 Section 39-26-715(1)(a)(II)(C), C.R.S.
5

Section 39-26-715(1)(a)(II)(B), C.R.S.

6 See paragraph (3) of 1 CCR 201-4, Rule 39-26-102(11) (defining “auto camp” for purposes of the sales tax on

rooms and accommodations).
7 1 CCR 201-5, Special Rule 22.
8 Section 39-26-104(1)(a), C.R.S.
9 Sections 39-26-202 and 39-26-204(1), C.R.S.
10 Section 39-26-102(9), C.R.S.
11 Section 39-26-102(19)(a), C.R.S.
12 Section 39-26-202(1), C.R.S.; 1 CCR 201-4, Rule 39-26-202. See also IBM v. Charnes, 601 P.2d 622, 625
(Colo.1979), “[A]n inventory withdrawal triggers the use tax belatedly…it triggers a retroactive recognition that a
previous purchase – earlier thought to be wholesale – actually was retail.”
13 Section 39-27-102(1)(a)(I)(B) and (1)(a)(I)(C), C.R.S.
14 Section 39-27-102(1)(a)(I)(C), C.R.S. See also section 39-27-104(5), C.R.S., for additional requirements for a
person who sells liquefied petroleum gas at retail.

GIL 23-003
August 3, 2023
Page 3

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.
Thank you for your request.
Sincerely,

Office of Tax Policy
Colorado Department of Revenue