Must a Colorado seller collect sales tax on wholesale goods sold for resale to a purchaser outside the United States when the purchaser takes possession in Colorado under FOB Origin terms?

Plain-English summary

Colorado’s wholesale exemption does not disappear merely because the buyer is outside the United States, the contract uses FOB Origin, the buyer takes title and possession in Colorado, or the goods are later exported. If the transaction is a true sale for resale, it is a wholesale sale rather than a taxable retail sale.

The seller still carries the burden of proving the exemption. It must collect exemption information—such as Colorado form DR 5002 or equivalent records—and exercise due diligence to verify that the foreign purchaser is authorized to buy for resale and that the goods are reasonably intended for resale in the purchaser’s ordinary business.

For an out-of-country purchaser, the Department says the seller may inspect and retain a valid foreign resale license, exemption certificate, or other authorized documentation issued by the purchaser’s government, treating the foreign buyer like an out-of-state purchaser for this purpose. If the seller cannot resolve doubts about eligibility, it must collect tax.

What this means for you

Colorado wholesalers and exporters

FOB Origin terms do not by themselves turn a wholesale transaction into a taxable Colorado retail sale. Focus on whether the purchaser is buying for resale and whether your records prove that fact.

Foreign purchasers

Be prepared to provide current resale or exemption documentation from the appropriate issuing government. The seller must keep sufficient records and reasonably conclude that the goods will be resold in your ordinary business.

Accountants and tax professionals

Do not confuse the wholesale-exemption analysis with retail-sale sourcing. The letter notes that shipping terms can affect where a retail sale is sourced, but says location, shipping terms, and export status do not change the exemption for a qualifying wholesale sale.

Common questions

Q: Does FOB Origin make the wholesale sale taxable in Colorado? A: No. The Department says qualifying wholesale sales remain exempt regardless of the shipping terms or where the purchaser takes title and possession.

Q: Does the buyer have to be located in the United States?
A: No. The wholesale exemption applies regardless of the purchaser’s location.

Q: Is export required for the exemption?
A: No. The sale must qualify as a wholesale sale for resale; the letter says exemption does not depend on whether the goods are exported.

Q: What proof should the seller keep?
A: The seller should collect DR 5002 or equivalent exemption information, verify the purchaser’s valid foreign resale or exemption documentation, retain a copy, and reasonably conclude the goods are for resale in the purchaser’s ordinary business.

Q: What if the seller is unsure the buyer qualifies?
A: The seller must collect sales tax if it cannot resolve the doubt.

Q: Is this GIL binding on the Department?
A: No. It is general guidance and expressly makes no specific determination.

Q: Does it cover self-collected home-rule city tax?
A: No. Those cities administer their own sales and use taxes.

Citations and references

• § 39-26-104(1)(a), C.R.S. (sales tax on retail sales)
• § 39-26-102(9), C.R.S. (retail sale excludes wholesale sales)
• § 39-26-102(19)(a)(I) and (II), C.R.S. (wholesale sales for resale)
• § 39-26-105(3)(a), C.R.S. (seller’s burden)
• § 39-26-104(3)(a), C.R.S. (retail-sale sourcing)
• 1 CCR 201-4, Rule 39-26-105-3 (documentation and due diligence)
• 1 CCR 201-1, Rule 24-35-103.5 (GIL/PLR procedure)

Source

• Landing page: Colorado Sales & Use Tax Letter Rulings
• Original PDF: GIL-26-002.pdf

Original ruling text

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

GIL 26-002
June 16, 2026
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
Via Electronic Mail: XXXXXXXXX
Re: Wholesale Sales to Businesses Outside the United States
Dear XXXXXXXXX:
You submitted a request for a general information letter regarding the taxability of wholesale sales to businesses outside the United States. 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 Whether a seller must collect Colorado sales tax on wholesale sales to a purchaser located outside the United States for resale outside the United States if the purchaser takes title and possession of the goods in Colorado by Free on Board (FOB) Origin shipment. Discussion In general, Colorado imposes a sales tax on the retail sale of tangible personal property.1 A retail sale includes all sales except wholesale sales.2 A wholesale sale means a sale by wholesalers to retail merchants, jobbers, dealers, or other wholesalers for resale.3 Wholesale sales are exempt from sales tax, regardless of the purchaser’s location, the shipping terms, and whether the goods are exported.4 If a purchaser claims the wholesale exemption or any other sales tax exemption, the burden is on the seller to prove they are exempt from collecting the tax.5 The seller must exercise due diligence in verifying the 1

Section 39-26-104(1)(a), C.R.S.
Section 39-26-102(9), C.R.S.
3
Section 39-26-102(19)(a)(I), C.R.S.
4
Section 39-26-102(19)(a)(II), C.R.S. In contrast, shipping terms do affect the taxability of retail sales. If tangible personal property, commodities, or services are not received by the purchaser at the seller’s business location, the sale is sourced to the location where the purchaser takes possession of the goods or services. However, possession by a shipping company on behalf of the purchaser does not constitute possession by the purchaser. In such cases, the sale is sourced to the location indicated by instructions for delivery to the purchaser, if that location is known to the seller. See section 39-26-104(3)(a), C.R.S., for sourcing requirements. 5 Section 39-26-105(3)(a), C.R.S. 2

GIL 26-002
June 16, 2026
Page 2
information provided and determining the purchaser’s eligibility for the exemption.6 If the seller cannot resolve any doubt about the purchaser’s eligibility for the exemption, the seller must collect the tax at the time of sale.7 First, the seller must collect the required information on Department form DR 5002, Declaration of Wholesale or Entity Sales Tax Exemption, or in another format for its records.8 Then, the seller must verify the exemption information provided by the purchaser. The Department treats out-of-country purchasers the same as out-of-state purchasers set forth in 1 CCR 201-4, Rule 39-26-105–3. Accordingly, a seller may accept a valid and current out-of-country resale license, exemption certificate, or other authorized documentation from the issuing government by inspecting a physical copy and maintaining a copy for their records.9 For a wholesale exemption, the seller must also reasonably conclude that the goods sold are reasonably for resale in the course of the purchaser’s ordinary business.10 Miscellaneous This letter represents the good-faith opinion of Department personnel who are knowledgeable about state tax 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

6

1 CCR 201-4, Rule 39-26-105–3, paragraph (1).
Id. at paragraph (2)(c)(ii).
8
Id. at paragraph (2)(c)(i)(B).
9
Id. at paragraph (2)(a)(ii).
10
Id. at paragraph (2)(c)(i)(A).
7