Is an all-inclusive, bundled multi-day train 'travel experience package' — which lumps interstate train travel, on-board sightseeing/guides, catered meals, and a Colorado hotel night into one price — subject to Colorado sales tax?
Plain-English summary
The Colorado Department of Revenue ruled that an all-inclusive, multi-day train "travel experience package" is not subject to Colorado sales tax. The package bundled interstate train travel, on-board sightseeing and historical narration, catered meals, luxury bus transfers, and one overnight hotel stay in Colorado — all sold as a single lump-sum price.
Colorado taxes retail sales of tangible personal property and a short list of named services (including hotel rooms and accommodations), but it does not generally tax services. When a sale bundles taxable and nontaxable items together — a "mixed transaction" — the Department applies a two-step test:
- Are the items separable? An item is separable only if it could be bought later, on its own, with its nature unchanged. Here the package was sold as one all-inclusive bundle that customers could not buy piecemeal, so the elements were inseparable.
- What is the transaction's "true object"? For an inseparable bundle, the whole sale takes the tax character of what the buyer is really after. The Department found the true object was the two-day train travel experience — the sightseeing and guided interstate journey. The taxable pieces, especially the hotel night, just met the traveler's basic needs along the way and were incidental.
Because the true object is a nontaxable service, the entire inseparable package is not taxable. The Department noted the hotel's incidental role was underscored by the fact that customers couldn't pick their hotel — it might not even be assigned until after purchase. Having found the package non-taxable, the Department did not address the requester's follow-on questions about interstate sourcing, local taxes, or mileage-based proration.
What this means for you
Tour operators and travel-package sellers
If you sell a genuinely all-inclusive experience as one bundled price that buyers can't unbundle, Colorado looks to the true object of the whole package, not to each component. A package built around a nontaxable service (a tour, an experience) can carry incidental taxable elements (a hotel night, a meal) tax-free. But the structure matters: if you let customers buy the taxable pieces separately, or you separately state them, they become "separable" and are taxed on their own. Bundling is not a magic wand — the true object has to actually be the nontaxable service.
Hotels, lodging, and accommodations providers
Hotel rooms and accommodations are specifically taxable in Colorado. This ruling is the narrow exception: a hotel night swept into a larger experience bundle, where lodging is incidental and the guest doesn't even choose the property, can ride along tax-free. Standalone lodging sales remain taxable, and the underlying room blocks here were still bought by the operator with tax paid to the hotels.
Accountants and tax professionals
The analysis is the standard Colorado mixed-transaction framework: separability first (1 CCR 201-5, Special Rule 18; A.D. Store, 19 P.3d 680), then true object for inseparable bundles (1 CCR 201-5, Special Rule 40; Leanin' Tree, 72 P.3d 361). The decisive facts were that the bundle was non-severable (no buy-later option) and that the taxable lodging was incidental rather than the thing purchased. Watch the home-rule-city caveat below; the Department also expressly declined to rule on sourcing and proration.
Common questions
Q: Does this mean travel packages are never taxed in Colorado?
A: No. It means a package's taxability turns on whether it's separable and, if not, on its true object. A bundle whose true object is a nontaxable experience can be exempt even with taxable parts inside; a bundle whose true object is taxable property, or one where the taxable pieces are sold/stated separately, is taxed.
Q: What flips a bundled package into being taxable?
A: Letting customers buy the taxable components on their own (which makes them "separable" and taxable individually), separately stating them on the invoice, or structuring the package so its true object is really the taxable item rather than the service.
Q: Were the meals, hotel, and alcohol completely tax-free here?
A: The package sale to the customer wasn't taxed. But the operator still paid sales tax on its own purchases — the catered meals, the alcohol from a Colorado distributor, and the hotel room reservations all had tax paid upstream. Add-on upgrades were separately stated and outside this ruling.
Q: Does this ruling apply to my travel business?
A: Not automatically. A private letter ruling binds the Department only for the taxpayers and facts it was issued to and explicitly cannot be relied on by anyone else. It shows the Department's reasoning, but your facts may differ.
Q: Does this cover city sales tax too?
A: No. The Department administers state and state-administered local sales tax only. Colorado's self-collected home-rule cities set their own rules and may tax differently. Check with each home-rule 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")
- 1 CCR 201-5, Special Rule 18 (separability of items in a mixed transaction)
- 1 CCR 201-5, Special Rule 40 (true-object test)
- 1 CCR 201-1, Rule 24-35-103.5 (private letter ruling procedure)
Case law:
- A.D. Store Co. v. Exec. Dir. of Dept. of Rev., 19 P.3d 680 (Colo. 2001) (mixed transactions; separability)
- City of Boulder v. Leanin' Tree, Inc., 72 P.3d 361 (Colo. 2003) (true-object test)
- Noble Energy v. Colo. Dept. of Revenue, 232 P.3d 293 (Colo. App. 2010)
Source
- Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
- Original PDF: https://tax.colorado.gov/sites/tax/files/documents/PLR-23-004.pdf
Original ruling text
Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]
PLR 23-004
August 21, 2023
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
Via Electronic Mail: XXXXXXXXX
Re: Travel Experience Packages
Dear XXXXXXXXX:
You submitted a request for a private letter ruling on behalf of XXXXXXXXX (“Company A”) and
XXXXXXXXX (“Company B”), to the Colorado Department of Revenue (“Department”) pursuant to 1
CCR 201-1, Rule 24-35-103.5. This letter is the Department’s private letter ruling, and it applies to
both parties.1 This ruling is binding on the Department to the extent set forth in 1 CCR 201-1, Rule 2435-103.5. It cannot be relied upon by any taxpayer other than the taxpayers to whom the ruling is
made.
Issues
1. Whether the Basic Travel Experience Package (“basic package”) is subject to sales or use tax in
Colorado.
2. If the basic package is subject to sales or use tax in Colorado, whether Company A, as the
company selling the Package, or Company B, as a service provider, would have the obligation of
registering, collecting, and remitting applicable sales or use taxes in Colorado if interstate travel
begins in Colorado and ends in another state.
3. Whether sales or use tax is due on the basic package if interstate travel begins in another state
and ends in Colorado.
4. If sales tax is due on the basic package, which includes interstate travel, whether local sales or
use taxes must be collected.
5. If sales tax is due on the basic package, which includes interstate travel, whether sales tax can be
prorated based on train miles traveled in Colorado.
1 Paragraph (10)(d) of 1 CCR 201-1, Rule 24-35-103.5 states that “a taxpayer may not rely on a Ruling issued to
another taxpayer, including a related party, unless such person is disclosed in the request and the department
expressly agrees to apply the Ruling to such persons.”
PLR 23-004
August 21, 2023
Page 2
Conclusions
The basic package is not subject to sales tax in Colorado. Because the basic package is not subject
to sales tax, the Department is not addressing the remaining issues.
Background2
The company conducts business as a travel experience enterprise. The company’s brand name
conducts travel business through two legal entities: Company A and Company B. Company A and
Company B are sister companies.
Company A is based outside of Colorado and is not registered in Colorado for sales and use tax.
Company A creates and markets travel experience packages, bills customers for the travel
packages/products/services offered, recognizes revenue and expenses for travel, and provides
customer service. Company A does not actually provide the travel packages but rather contracts with
Company B to provide the actual travel experience for customers.
Company B, headquartered in Colorado, provides operational support services to Company A, and
executes the guest experiences set by Company A. Company B owns property, employs staff in
Colorado, and contracts directly with hotels, food/beverage companies, and other third-party service
providers. Company B provides all travel related services to customers.
Customers have no obligation to utilize any of the amenities offered but cannot opt-out of any basic
package amenities in an effort to reduce the purchase price. Company B negotiates contracts with
third-party companies to reserve specific blocks of rooms and acquires products and/or services at
specific rates. Company B remits payment to the third-party companies and pays applicable sales,
use, and hotel occupancy taxes calculated upon their negotiated rates.
Basic Travel Experience Package
The basic travel experience package lasts two days and is an all-inclusive package offered as a
bundle. The customer invoices are presented as one line charge. However, the customer’s itinerary
does break out their travel arrangements by day.
Basic packages are advertised online on the company's website. Company does not sell travel
packages sold by other companies. Add-ons cannot be purchased without the purchase of a basic
package. The basic package is booked as a lump-sum total including interstate travel, onboard meals,
and overnight hotel stay in Colorado. Add-ons are separately stated from the basic package.
The basic package includes two days on board the train, with one night of accommodation in Colorado,
and transfers to and from the train siding at the beginning and end points. Customers are provided
with interstate travel to landmark destinations; guided, on-train sightseeing opportunities; historical
knowledge; catered meals; and a hotel stay. Travel may begin or conclude in Colorado. The reciprocal
2 Paragraph (4)(b)(ii) of 1 CCR 201-1, Rule 24-35-103.5 requires the request for a private letter ruling to include a
statement of facts. This section generally recites the statement of facts provided in the request, which is not an
indication that the Department found such facts relevant to its analysis. Some relevant facts may be omitted to
ensure confidentiality as required by section 24-35-103.5(5), C.R.S. The terms used in this section to describe the
factual background are generally those of the requester.
PLR 23-004
August 21, 2023
Page 3
beginning or end of the trip will originate or terminate outside of Colorado. Currently, no travel package
is offered that solely includes travel within Colorado.
During the trip, customers are served three designated meals and offered periodic non-alcoholic
beverages, alcoholic beverages, and snacks. Company B purchases prepared meals and beverages
from a third-party catering company and the meals and drinks are served by Company B waitstaff.
The catering company makes delivery to Company B’s Colorado origin station. Company pays
applicable sales taxes charged by the catering company.
Company B bartenders and waitstaff serve alcoholic beverages to customers during the tour.
Company B holds a liquor license with the State of Colorado. Alcoholic beverages are purchased from
a third-party distributor located in Colorado. The distributor makes delivery to Company B’s Colorado
origin station. Company pays applicable sales taxes charged by the third-party distributor.
Customers are provided with overnight hotel accommodations at a designated midpoint hotel in
Colorado. Midpoint hotels are preassigned roughly 30 days before travel, and guests cannot select
which hotel they are staying at. Guests pay a flat fee for these hotels, and different hotels do not
change the price for guests. Based on previously negotiated terms Company B separately pays the
third-party hotel provider for the room reservations and any applicable taxes. Company B directly
provides customers with their room keys. Customers can then enter the hotel and check into their
rooms without having to provide additional information at the hotel front desk. Customers do not
directly interact with the hotel staff regarding reservations or check-in.
Customers are also provided with necessary luxury bus transportation to and from the train station at
the designated midpoint along the way at no additional charge.
Add-On Services for Travel Experience Packages3
Customers also have the option to choose from numerous upgraded travel packages that include
additional products and services not offered with the basic package. Add-ons cannot be purchased
without the purchase of a basic package. Add-on products and services are not separately stated on
customer invoices. Rather, customers receive an updated package that separately identifies the
customers’ daily travel itineraries with updated pricing. However, add-on products and services would
be separately identified on customers' itineraries. Company B tracks each of the add-on services
separately on their books and records.
Add-on products and services that customers can choose from include upgraded food/beverage
options, additional hotel accommodations, motorcoach transportation to and from airports, and guided
tours. Applicable sales tax and other applicable taxes are charged by the third-party companies
supplying products or services at the Colorado state tax rate.
Discussion
Colorado imposes a sales tax on retail sales of tangible personal property.4 The term “tangible
personal property” means “corporeal personal property,” and generally embraces all goods, wares,
merchandise, products and commodities, and all tangible or corporeal things and substances that are
3 While the requester provided background information about the add-on services, the issues only address the basic
package. Therefore, the Department is not expressing any opinion about the taxation of the add-on services.
4 Section 39-26-104(1)(a), C.R.S.
PLR 23-004
August 21, 2023
Page 4
dealt in and capable of being possessed and exchanged.5 Colorado does not generally impose sales
tax on services. Only those services specifically listed in the statute, including the entire amount
charged for rooms or accommodations, are subject to tax.6
However, services that are otherwise excluded from the state sales tax may be taxable if they are
provided as part of a mixed transaction that also includes the sale of tangible personal property or
taxable services.7 The first factor in the taxability of a mixed transaction is whether the taxable and
nontaxable items are “separable” from each another. An item is “separable” from the rest of the mixed
transaction when its nature remains the same whether it is contracted for as part of the mixed
transaction or at a later time, and purchase at a later time is an option.8
If an otherwise nontaxable service is inseparable from the taxable items with which it is sold, then the
taxability of the entire mixed transaction depends on the true object of the transaction from the
purchaser’s perspective.9 The true object test analyzes the totality of the circumstances to identify the
characteristics of the transaction that make it more analogous to the sale of a taxable item or more
analogous to the sale of a nontaxable item.10 If the true object sought by the purchaser is a nontaxable
item per se, then the transaction is not subject to tax even though some otherwise taxable items are
included in the transaction.11
The basic package sold by Company A and provided by Company B combines multiple elements of
taxable and nontaxable tangible personal property and services, including transportation by train and
bus, tour guide services, food and drink, and hotel accommodations. Therefore, its sale is a mixed
transaction.
As stated in the background section, the basic package is sold as an all-inclusive package offered as
a bundle. Because Company A and Company B do not market or sell the elements of the basic
package separately, purchase of the nontaxable elements at a later time is not an option. Therefore,
the transaction is inseparably mixed, and the taxability of the entire transaction depends on the true
object of the transaction.
Based on the information provided, the true object of the basic package is the two-day train travel
experience. Customers are purchasing on-train sightseeing opportunities and historical knowledge
provided by Company B during interstate travel to landmark destinations. The taxable elements of the
basic package, such as the hotel accommodations, primarily meet the customer’s basic needs during
the experience, and thus are not the true object of the transaction. The incidental nature of the
accommodations is evidenced by the fact that the specific midpoint hotel is not selected by the
customer and may not be selected by Company B until after the customer purchases the package.
Because the true object of the basic package is a nontaxable service, the sale of the basic package is
more analogous to the sale of a nontaxable service, and this inseparably mixed transaction is not
subject to sales tax.
5 Section 39-26-102(15)(a)(I), C.R.S.; paragraph (1) of 1 CCR 201-4, Rule 39-26-102(15).
6 A.D. Store Co., Inc. v. Executive Dir. of Dept. of Rev., 19 P.3d 680, 683 (Colo. 2001); section 39-26-104(1), C.R.S.
7 See 1 CCR 201-4, Rule 39-26-102(12); 1 CCR 201-4, Rule 39-26-102(7)(a); A.D. Store, 19 P.3d at 683-684.
8 A.D. Store, 19 P.3d at 684; paragraph (1)(b) of 1 CCR 201-5, Special Rule 18.
9 1 CCR 201-5, Special Rule 40; City of Boulder v. Leanin' Tree, Inc., 72 P.3d 361, 363 (Colo. 2003); Noble Energy v.
Co Dept. of Revenue, 232 P.3d 293, 297-98 (Colo. App. 2010).
10 Leanin' Tree, 72 P.3d at 365-366.
11 1 CCR 201-5, Special Rule 40; paragraph (5) of 1 CCR 201-4, Rule 39-26-102(15); Leanin’ Tree, 72 P.3d at 363.
PLR 23-004
August 21, 2023
Page 5
Miscellaneous
This ruling is premised on the assumption that Company A and Company B have completely and
accurately disclosed all material facts, that all representations are true and complete, and that
Company A and Company B have otherwise complied with the requirements of section 24-35-103.5,
C.R.S., and the rules promulgated pursuant thereto. The Department reserves the right, among others,
to independently evaluate Company A and Company B’s facts, representations, and assumptions.
The ruling is null and void if any such fact, representation, or assumption is incorrect and has a material
bearing on the conclusions reached in this ruling. This ruling is binding on the Department and is
subject to modification or revocation, in accordance with 1 CCR 201-1, Rule 24-35-103.5.
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
This ruling cannot be relied upon by any other taxpayer other than the taxpayer to whom the
ruling is made.