Are factory-built (prefabricated/modular) home modules exempt from Colorado sales tax, and who owes tax — the manufacturer's suppliers, the builder, or the home buyer?

Plain-English summary

A Colorado company that manufactures prefabricated (factory-built) housing modules — together with a related construction affiliate that installs them on foundations and sells the finished homes — asked the Department of Revenue how Colorado sales and use tax applies across the whole chain. The Department worked through seven questions. The short version: the modules are largely tax-exempt, and the finished home is never taxed as a sale.

Here's the chain, step by step:

1. The manufacturer's raw materials are exempt. Lumber, drywall, windows, wiring, plumbing, HVAC components and the like that get built into the modules are bought tax-free as a wholesale/component-part manufacturing exemption — the materials become part of a product made for sale. This exemption isn't optional, so it applies to state-administered local taxes too.

2. The sale of the finished modules is exempt — partially, then fully. The Department found the products qualify both as "manufactured homes" (for the older partial exemption) and as "modular homes" (for the newer full exemption):

   • Before January 1, 2025: a partial exemption — 48% of the purchase price is exempt from state sales tax.
   • On or after January 1, 2025: a full exemption from state sales tax, thanks to House Bill 24-1036, which expanded the exemption to "modular homes."
   • Local taxes vary. The full (post-2025) exemption is an optional exemption for state-administered cities, towns, and counties, so it applies only where they've adopted it. The 48% partial exemption is not optional, so it applies across state-administered locals.

3. Sourcing follows where the buyer takes possession. The sale is sourced to where the buyer receives (takes possession of) the modules. If the builder picks them up at the factory, the sale is sourced to the manufacturing facility. If a third-party shipping company hauls them, the carrier's possession doesn't count as "receipt," so the sale is sourced to where the builder actually takes possession — and if that can't be determined, the rules fall back through the buyer's address to, ultimately, the factory (the ship-from location).

4. The finished home's conveyance isn't taxed. Once the modules are installed on a foundation and become an integral and inseparable part of the realty, the completed residence is real property, not tangible personal property. Selling a house is not a taxable sale, so when the affiliate conveys the finished home to the buyer (or to a 501(c)(3) entity that provides housing), no state or state-administered local sales tax applies.

5. One question the Department wouldn't answer. It declined to rule on whether the affiliate owes local use tax when modules are used in a different jurisdiction than where the sale was sourced — because local use taxes are administered by the cities, towns, and counties themselves, not the Department, so it lacks authority to rule on them.

A note on scope: the Department agreed to apply this ruling to both the manufacturer and its related construction affiliate, but not to the unrelated "third-party contractors" mentioned in the request.

What this means for you

Prefabricated and modular home manufacturers

If your factory-built units meet Colorado's "manufactured home" / "modular home" definitions, two big breaks stack up: you can buy your input materials tax-free as a manufacturer, and your sales of the modules are exempt from state sales tax (fully, for sales on or after January 1, 2025). Keep documentation that your products fit the statutory definitions — that's what the whole exemption rests on. Watch the local layer: the full post-2025 exemption only applies in state-administered cities, towns, and counties that have adopted the option, so check each jurisdiction.

Builders and construction affiliates

Be precise about sourcing: where your crew or you take possession of the modules drives which jurisdiction's tax (and exemptions) apply — and using a third-party carrier shifts "receipt" to where you actually take the modules, not the factory. When you convey the finished home, you don't charge sales tax, because it's now real property. But note the Department wouldn't decide the local use tax question for cross-jurisdiction use — you may need to take that up with the specific local government.

Accountants and tax professionals

The exemptions: materials under the wholesale/component-part exemption (§ 39-26-102(20)(a), C.R.S., with the use-tax counterpart in § 39-26-713(2)(b), C.R.S.); the module sale under § 39-26-721(1), C.R.S. (48%, non-optional locally) pre-2025 and § 39-26-721(3)(b), C.R.S. (full, as amended by HB 24-1036, optional for local cities/towns/counties) from 2025 on. Sourcing runs through § 39-26-104(3)(a), C.R.S., with "receipt" excluding a shipping company's possession. The finished-home conveyance is untaxed because installed modules become realty (not TPP). Use the Department's DR 1002 publication and address-level GIS tool to confirm which local jurisdictions adopt the optional exemption.

Common questions

Q: Does a manufacturer of prefab/modular homes pay sales tax on the materials it builds into the units? A: No. The materials and components incorporated into the modules qualify for Colorado's wholesale/component-part manufacturing exemption, which is not optional and also applies to state-administered local taxes.

Q: Are sales of the housing modules themselves taxed?
A: They're largely exempt. Before January 1, 2025, 48% of the purchase price is exempt from state sales tax (a partial exemption). On or after January 1, 2025, the modules are fully exempt from state sales tax under House Bill 24-1036. Local-tax treatment varies by jurisdiction.

Q: Why do local taxes "vary"?
A: The full post-2025 exemption is an optional exemption that state-administered cities, towns, and counties may choose to adopt, so it applies only where adopted. The 48% partial exemption is not optional and applies across state-administered local jurisdictions.

Q: Where is the sale taxed — the factory or the building site? A: It's sourced to where the buyer takes possession of the modules. Pick-up at the factory sources the sale to the manufacturing facility; if a third-party carrier transports them, the sale is sourced to where the buyer actually takes possession (with fallbacks to the buyer's address and, last, the ship-from location).

Q: Does the home buyer pay sales tax when they buy the finished home? A: No. Once installed, the modules become a permanent, inseparable part of the real property, so conveying the completed home is a transfer of real property, not a taxable sale of tangible personal property.

Q: Does this ruling apply to my company?
A: Not automatically. It binds the Department only as to the specific taxpayer and its related construction affiliate, on their facts, and it explicitly cannot be relied on by any other taxpayer — including the third-party contractors named in the request. It does not cover self-collected home-rule city taxes.

Citations and references

Statutes, rules, and authority:

• § 42-1-102(48.8), C.R.S. (definition of "manufactured home," used in § 39-26-721(1)–(2))
• § 39-1-102(8.3), C.R.S. (definition of "modular home," used in § 39-26-721(3))
• § 39-26-721(1), C.R.S. (48% partial state sales-tax exemption for manufactured homes; not a local-option exemption)
• § 39-26-721(3)(b), C.R.S. (full state sales-tax exemption for modular homes, as amended by House Bill 24-1036; a local-option exemption for cities/towns/counties)
• § 39-26-102(20)(a), C.R.S. (exempt wholesale sale — materials that become a component part of a manufactured product)
• § 39-26-713(2)(b), C.R.S. (corresponding use-tax exemption)
• § 39-26-104, C.R.S. (imposition of sales tax) and § 39-26-104(3)(a), C.R.S. (sourcing rules); "receipt" excludes possession by a shipping company (§ 39-26-104(3)(d)(II), C.R.S.)
• § 29-2-105(1)(d), C.R.S. (local-option exemptions, including § 29-2-105(1)(d)(I)(P) for the full prefab exemption)
• § 29-2-109, C.R.S. and § 29-2-106(3)(a), C.R.S. (local use taxes administered by the local government — basis for the Department declining to rule on issue 6)
• 1 CCR 201-4, Rule 39-26-102(15)(2)(a) (real property is not tangible personal property)
• 1 CCR 201-5, Special Rule 10 (construction contractors as consumers of building materials)
• 1 CCR 201-1, Rule 24-35-103.5 (private letter ruling procedure)
• House Bill 24-1036 (2024 Colo. Sess. Laws 2523, 2536)
• A.D. Store Co., Inc. v. Dep't of Revenue, 19 P.3d 680 (Colo. 2001); C.F. & I. Steel Corp. v. Charnes, 637 P.2d 324 (Colo. 1981)
• Department publications: Sales Tax Topics: Prefabricated Housing; DR 1002 (local jurisdiction exemptions)

Source

• Landing page: Colorado Sales & Use Tax Letter Rulings
• Original PDF: PLR-25-001.pdf

Original ruling text

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

PLR 25-001
May 8, 2025
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Via Electronic Mail: XXXXXXXXXX
Re: Sales and Use Taxes on Prefabricated Housing Modules
Dear XXXXXXXXXX:
You submitted a request for a private letter ruling on behalf of XXXXXXXXXX (“Taxpayer”), and XXXXXXXXXX (“Construction Affiliate”), a related party,1 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. This ruling is binding on the Department to the extent set forth in 1 CCR 201-1, Rule 24-35-103.5. It cannot be relied upon by any taxpayer other than the taxpayer to whom the ruling is made. Issues

1. Whether Taxpayer’s products are “manufactured homes” as that phrase is defined in section
   42-1-102(48.8), and used in section 39-26-721(1) and (2), C.R.S.
2. Whether Taxpayer’s products are “modular homes” as that phrase is defined in section 39-1102(8.3), and used in section 39-26-721(3), C.R.S.
3. Whether Taxpayer’s purchases of materials and components from suppliers for
   incorporation into its prefabricated housing modules are exempt from state and stateadministered local sales and use tax.
4. Whether 48% of the purchase price is exempt from sales tax for sales made prior to January
   1, 2025 and 100% of the purchase price is exempt from state sales tax, and certain stateadministered local sales taxes, for sales made on and after January 1, 2025.
5. Whether sales of the prefabricated housing modules are sourced to the Taxpayer’s
   Manufacturing Facility or to the building site.

1 The request disclosed Construction Affiliate as a related party.

Under paragraph (10)(d) of 1 CCR 201-1, Rule 2435-103.5, the Department agrees to apply this ruling to Construction Affiliate in addition to Taxpayer. However, the ruling will not be applied to the tax liability of any other person including those that the request defines as “Third-Party Contractors” in accordance with the rule.

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6. Whether Construction Affiliate must pay local use taxes if the prefabricated housing modules
   are used in the construction of homes at a building site in a jurisdiction different from where the sale of the modules was sourced.
7. Whether Construction Affiliate must collect state and state-administered local sales tax when
   the home is conveyed to the ultimate owner.
   Conclusions
8. Taxpayer’s products are “manufactured homes” as that phrase is defined in section 42-1102(48.8), and used in section 39-26-721(1) and (2), C.R.S.2
9. Taxpayer’s products are “modular homes” as that phrase is defined in section 39-1-102(8.3),
   and used in section 39-26-721(3), C.R.S.
10. Taxpayer’s purchases of materials and components from suppliers for incorporation into
    prefabricated housing modules are exempt from state and state-administered local sales and use tax.
11. Sales of the prefabricated housing modules in Colorado prior to January 1, 2025, qualify for
    the partial exemption from state sales tax provided under section 39-26-721(1), C.R.S. Sales of the prefabricated housing modules in Colorado on and after January 1, 2025, qualify for the full exemption from state sales tax provided under section 39-26-721(3)(b), C.R.S., as amended by House Bill 24-1036.3 Exemptions from state-administered local taxes will vary.
12. Sales of the prefabricated housing modules are sourced to the location where the
    prefabricated housing modules are received by Construction Affiliate or other Third-Party Contractors.
13. The Department declines to rule on this issue for the reasons discussed below.
14. The conveyance of the completed home to its ultimate owner is not subject to state and
    state-administered local sales tax.

2 As noted in the Department’s publication Sales Tax Topics: Prefabricated Housing, section 39-26-721, C.R.S.,

defines the term “manufactured housing” in subsections (1) and (2) differently from subsection (3). The publication uses the term “manufactured housing” to refer exclusively to those homes exempt under subsection (3). To provide similar clarity, this ruling will generally refer to taxpayer’s products as “prefabricated housing modules” and will use the term “manufactured housing” only to the extent necessary to explain its ruling for issues 1 and 2 related to the exemptions in subsections (1) and (2). Taxpayer does not suggest, nor does the Department conclude, that its prefabricated housing modules are “manufactured housing” as that term is used in subsection (3) and in the aforementioned guidance publication. 3 2024 Colo. Sess. Laws 2523, 2536.

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Background4
Taxpayer manufactures prefabricated housing modules at its Colorado manufacturing facility, which is located within a state-administered city/town (the “Manufacturing Facility”). These prefabricated housing modules do not have motive power, nor are they licensed as a vehicle. Rather they are designed to be permanently affixed to land at a residential site and used as a residential dwelling. Furthermore, Taxpayer’s prefabricated housing modules are not subject to the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C.
§ 5401 et seq.) and do not require a certification label also known as a “HUD tag.” Taxpayer purchases materials and components from unrelated vendors or suppliers, some of which are located in Colorado, and some of which are located outside the State. These materials and components include things like lumber, drywall, carpeting and flooring, shelving, insulation, windows, doors, roofing materials, connectors, fasteners, electrical and plumbing system components, and heating and air conditioning system components. The vendors and suppliers either deliver these materials using their own vehicles, or they arrange for delivery of the materials by common carrier. Delivery is to Taxpayer’s Manufacturing Facility. Taxpayer uses the materials and components to manufacture various prefabricated housing modules. Taxpayer sells all of these prefabricated housing modules to Construction Affiliate or to unrelated third-party contractors (each, a “Third-Party Contractor” and collectively, the “ThirdParty Contractors”). Construction Affiliate (or a Third-Party Contractor) either takes title and possession, itself, of the prefabricated housing modules at the Manufacturing Facility and then transports the prefabricated housing modules to the ultimate building sites, or engages a thirdparty shipping company to pick up the modules at the Manufacturing Facility and transport them to the building sites. At those building sites, Construction Affiliate incorporates the prefabricated housing modules onto building foundations that have been prepared for that purpose. At that time, Construction Affiliate conveys the completed residences to either individual customers that will use them as their primary home residence, or to entities (including Internal Revenue Code section 501(c)(3) tax-exempt entities) that will make them available to individuals and families for residential use. Discussion Colorado imposes a sales tax on most sales of tangible personal property at retail, as well as certain services.5 The term “tangible personal property” does not include real property, such as land and buildings.6 However, until tangible personal property is built into real property such that it becomes an integral and inseparable part of the realty, its retail sale remains subject to Colorado sales tax.7

4 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. 5 Section 39-26-104, C.R.S. 6 1 CCR 201-4, Rule 39-26-102(15)(2)(a). 7 Id.

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The Colorado Revised Statutes authorize cities, towns, counties, and certain types of special districts to impose a sales tax.8 These sales taxes are collected, administered, and enforced by the Department in the same manner as the state sales tax.9 In most cases, these local sales taxes are imposed upon the same property and services subject to the state sales tax.10 Cities, towns, and counties are, however, permitted to deviate from the state sales tax base with respect to certain exemptions.11 Special district sales taxes differ in very limited respects, and those deviations are normally mandatory.12 This ruling will refer to the sales taxes imposed by these cities, towns, counties, and special districts collectively as state-administered local sales taxes. In addition to these state-administered local sales taxes, certain self-collecting home-rule cities may impose sales and use taxes under the independent authority allowed to them by the state constitution.13 This ruling does not extend to the sales taxes imposed by those home-rule cities.

1. Taxpayer’s products are “manufactured homes” as that phrase is defined in section 42-1102(48.8), and used in section 39-26-721(1) and (2), C.R.S.
   Construction contractors are generally regarded as retail purchasers of tangible personal property that they will build into a building or structure.14 As such, contractors must generally pay Colorado sales tax when purchasing such property.15 Accordingly, contractors will not normally collect sales tax on the materials incorporated into a building or structure.16 Furthermore, because real property construction is not a taxable service, contractors will not normally collect sales tax on separately stated charges for their labor.17 However, the taxable purchase price of tangible personal property sold after manufacturing includes the gross value of all the materials used, labor and service performed, and the profit

8 Section 29-2-102, C.R.S. (regarding incorporated towns and cities); 29-2-103, C.R.S. (regarding counties). The

taxing authority for those entities that the Department refers to generally as “special districts” is found in the statutes establishing or permitting the establishment of the entity. See, e.g., section 32-9-119(2)(a), C.R.S. (empowering the board of the Regional Transportation District to impose a sales tax); 32-13-107(1)(a), C.R.S. (same with respect to the board of the Scientific and Cultural Facilities District); 43-4-605(1)(j)(I) (same with respect to regional transportation authorities). 9 Section 29-2-106, C.R.S. For special districts, refer to the enabling statutes as described in note 8, above. 10 Section 29-2-105, C.R.S. (with respect to cities and towns). For special districts, refer to the enabling statutes as described in note 8, above. 11 Section 29-2-105(1)(d), C.R.S. 12 The most common deviation requires special districts to exempt sales of cigarettes from the districts’ sales taxes. E.g., 29-1-204.5(3)(f.1), C.R.S. (regarding multi-jurisdictional housing authorities); 32-1-1003.5(5) (health assurance districts). 13 Colo. Const. art. XX, § 6. Section 29-2-106(4) permits the Department to collect the sales taxes of home-rule cities at their request. The Department generally does not distinguish these state-administered home-rule cities from other state-administered cities and towns because subsection (4)(a)(I)(A) of that section requires them to conform their ordinances to the requirements under article 2 of title 29 applicable to statutory cities and towns. This ruling applies to state-administered home-rule cities accordingly. 14 1 CCR 201-5, Special Rule 10(2). 15 Id. 16 Id. Paragraph (3) of the special rule discusses the circumstances when a contractor is required to collect sales tax on the sale of building materials and other property. 17 See A.D. Store Co., Inc. v. Dep’t of Revenue, 19 P.3d 680, 683 (Colo. 2001) (“[N]o service is taxable, except those services specifically listed in the statute itself.”).

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thereon.18 Recognizing that this rule could create a disparity between the taxes applied to prefabricated homes and site-built homes, Colorado’s statute allows a partial exemption from sales tax for certain prefabricated homes.19 For purposes of the partial exemption in section 39-26-721(1) and (2), the term “manufactured home” is defined by reference to section 42-1-102(48.8), C.R.S., which states: “Manufactured home” means any preconstructed building unit or combination of preconstructed building units, without motive power, where such unit or units are manufactured in a factory or at a location other than the residential site of the completed home, which is designed and commonly used for occupancy by persons for residential purposes, in either temporary or permanent locations, and which unit or units are not licensed as a vehicle. As described in the factual basis for the request, Taxpayer’s products are within this definition of “manufactured home.”

2. Taxpayer’s products are “modular homes” as that phrase is defined in section 39-1-102(8.3),
   and used in section 39-26-721(3), C.R.S.
   During the pendency of this request, the General Assembly enacted House Bill 24-1036 concerning the adjustment of certain tax expenditures.20 Section 36 of the bill amended section 39-26-721(3), C.R.S. Under prior law, subsection (3) provided a complete exemption for “manufactured homes” and “tiny homes.” The term “manufactured home” in subsection (3) referred to the definition at 39-1-102(7.8), C.R.S., which differs from the definition at section 421-102(48.8), C.R.S. Taxpayer’s products do not meet the definition of “manufactured home” used by subsection (3) primarily because they are not subject to the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. § 5401 et seq.). House Bill 24-1036 expanded the subsection (3) exemption to include “modular homes” as defined in section 39-1-102(8.3), C.R.S., and any closed panel system utilized in construction of a factory-built residential structure as defined in section 24-32-3302(10), C.R.S.21 Section 39-1102(8.3), C.R.S., defines “modular home” to mean: any preconstructed factory-built building that: (a) Is ineligible for a certificate of title pursuant to part 1 of article 29 of title 38, C.R.S.; (b) Is not constructed in compliance with the “National Manufactured Housing Construction and Safety Standards Act of 1974”, 42 U.S.C. sec. 5401 et seq., as amended; and

18 1 CCR 201-4, Rule 39-26-102(7)(a)(8).
19 Section 39-26-721(1), C.R.S.
20 2024 Colo. Sess. Laws 2523.
21 Id. at 2536.

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(c) Is constructed in compliance with building codes adopted by the division of housing in the department of local affairs. As described in the factual basis for the request, Taxpayer’s products are within this definition of “modular home.” As discussed further below, this brings Taxpayer’s products within the expanded exemption created by House Bill 24-1036 effective January 1, 2025.

3. Taxpayer’s purchases of materials and components from suppliers for incorporation into the
   prefabricated housing modules are exempt from state and state-administered local sales and use tax. Colorado sales and use taxes are imposed upon the vast majority of retail sales of tangible personal property and the storage, use, or consumption of tangible personal property purchased at retail.22 Retail sales include all sales made within the state except wholesale sales.23 Likewise, the sale and purchase of tangible personal property by a person engaged in the business of manufacturing or compounding for sale, profit, or use, any article, substance, or commodity, which tangible personal property enters into the processing of or becomes an ingredient or component part of the product or service which is manufactured, compounded, or furnished is deemed to be an exempt wholesale sale.24 Taxpayer is engaged in the business of manufacturing prefabricated housing modules, which constitute “articles” of tangible personal property. To manufacture these prefabricated housing modules, Taxpayer purchases materials including lumber, drywall, carpeting and flooring, shelving, insulation, windows, doors, roofing materials, connectors, fasteners, electrical and plumbing system components, and heating and air conditioning system components. Taxpayer combines these materials to create these prefabricated housing modules, which it then sells to Construction Affiliate and other Third-Party Contractors. These materials are essential components of the finished product.25 Therefore, their purchase by Taxpayer, and their subsequent storage and use by Taxpayer, is exempt from Colorado sales and use tax. Because the wholesale sale exemption set forth in section 39-26-102(20)(a), C.R.S., is not an optional exemption, it applies to state-administered local jurisdictions.26
4. Sales of the prefabricated housing modules in Colorado prior to January 1, 2025, qualify for
   the partial exemption from state sales tax provided under section 39-26-721(1), C.R.S. Sales of the prefabricated housing modules in Colorado on and after January 1, 2025, qualify for the full exemption from state sales tax provided under section 39-26-721(3)(b), C.R.S., as amended by House Bill 24-1036.27 Exemptions from state-administered local taxes will vary. As discussed above, Taxpayer’s prefabricated housing modules are “manufactured homes” as defined in section 42-1-102(48.8), C.R.S. Therefore, 48% of their purchase price is exempt 22 Sections 39-26-713(1)(a) and 39-26-202(1)(b), C.R.S. 23 Section 39-26-102(9), C.R.S. 24 Section 39-26-102(20)(a), C.R.S.

A corresponding use tax exemption allowed by section 39-26-713(2)(b), C.R.S.

25 See C.F. & I. Steel Corp. v. Charnes, 637 P.2d 324, 328 (Colo. 1981). 26 See, section 29-2-105(1)(d), C.R.S.

above.
27 2024 Colo. Sess. Laws 2523, 2536.

For special districts, refer to the enabling statutes as described in note 8,

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from state sales tax when the prefabricated housing modules are sold at retail to Construction Affiliate and other Third-Party Contractors in this state prior to January 1, 2025. Taxpayer’s prefabricated housing modules are also “modular homes” as defined in section 39-1102(8.3), C.R.S. Therefore, sales made on and after January 1, 2025, will be fully exempt for state sales tax purposes. The full exemption allowed by section 39-26-721(3)(b), C.R.S., will also apply to state-administered local jurisdictions other than cities, towns, and counties. Pursuant to section 29-2-105(1)(d), C.R.S., state-administered cities, towns, and counties are granted the option whether to enact certain state sales tax exemptions and apply them to their local taxes collected by the Department. The full exemption in section 39-26-721(3), C.R.S., is one of the option exemptions.28 Therefore, the full exemption will apply in those cities, towns, and counties that have expressly adopted the option exemption.29 Conversely, the 48% exemption allowed by section 39-26-721(1), C.R.S., is not an option exemption.30 As a result, sales in those cities, towns, and counties that do not adopt the option in section 29-2105(1)(d)(I)(P), C.R.S., are still subject to the 48% exemption.31 Department publication DR 1002 (available on the Department’s website) details whether stateadministered local jurisdictions apply a particular option exemption. Exemptions can also be reviewed for a particular address or location using the Department’s geographic information system, which is also accessible from the Department’s website.

5. Sales of the prefabricated housing modules are sourced to the location where the
   prefabricated housing modules are received by Construction Affiliate or other Third-Party Contractors. State statute provides a series of rules for purposes of determining where a sale of tangible personal property is made.32 Those rules provide: (I)

If tangible personal property, commodities, or services are received by the purchaser at a business location of the seller, the sale is sourced to that business location;

(II)

If tangible personal property, commodities, or services are not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser occurs, including the location indicated by instructions for delivery to the purchaser, if that location is known to the seller;

(III) If rules (I) or (II) do not apply, the sale is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller

28 Section 29-2-105(1)(d)(I)(P), C.R.S.; 2024 Colo. Sess. Laws at 2536–37. 29 See section 29-2-105(1)(d)(III), C.R.S. (clarifying that in the absence of an express provision regarding the

exemptions listed in subsection (1)(d)(I), the ordinances and resolutions must be construed as imposing the tax). 30 See section 29-2-105(1)(d)(I), C.R.S. 31 See id. (stating that sales exempt pursuant to article 2 of title 29 are the same as sales exempt pursuant to part 7 of article 26 of title 39 except for those optional exemptions listed in that subsection). 32 Section 39-26-104(3)(a), C.R.S.

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that are maintained in the ordinary course of the seller’s business, when use of this address does not constitute bad faith; (IV) If rules (I), (II), or (III) do not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including, if no other address is available, the address of a purchaser’s payment instrument, when use of this address does not constitute bad faith; or (V)

If rules (I), (II), (III), or (IV) do not apply, or if the seller is without sufficient information to apply the rules set forth in rules (I), (II), (III), or (IV), the sale is sourced to the location indicated by the address from which the tangible personal property, commodity, or service was shipped.33

As used in these rules, “receipt” or “receive” means taking possession of tangible personal property or commodities but does not include possession by a shipping company on behalf of the purchaser.34 The request states that in some cases Construction Affiliate or Third-Party Contractors take title and possession of the prefabricated housing modules at the Manufacturing Facility and then transports the prefabricated housing modules to the ultimate building sites. In these cases, the sales of the prefabricated housing modules are sourced to the Manufacturing Facility.35 All or part of the purchase price is exempt from tax as discussed above.36 In other cases, Construction Affiliate or Third-Party Contractors engage a third-party shipping company to pick up the prefabricated housing modules at the Manufacturing Facility and transport them to the building sites. Because the taking of possession by a third-party shipping company does not constitute “receipt” by Construction Affiliate or the Third-Party Contractor, “receipt” occurs at the location where Construction Affiliate or the Third-Party Contractor takes such possession.37 In these cases, the sourcing rules must be applied in turn. That is, the sale is not sourced to the Manufacturing Facility under rule (I).38 If Taxpayer knows the location where Construction Affiliate or the Third-Party Contractor takes possession, the sale is sourced to that location under rule (II).39 If Taxpayer does not know that location, the sale is sourced to the location indicated by an address for the purchaser available from the business records of the seller or obtained during the consummation of the sale under rules (III) or (IV), respectively.40 At last, if none of these rules can be applied, the sale would ultimately be sourced to the Manufacturing Facility under rule (V) as the location from which the prefabricated housing modules were

33 Id.
34 Id. at (3)(d)(II).
35 Id. at (3)(a)(I).
36 Sections 39-26-104(1)(a) and 39-26-721(1), C.R.S.
37 Section 39-26-104(3)(d)(II), C.R.S.
38 Id. at (3)(a)(I).
39 Id. at (3)(a)(II).
40 Id. at (3)(a)(III) and (3)(a)(IV).

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shipped.41 If the sale is sourced to a location in Colorado, all or part of the purchase price is exempt from state sales tax as discussed above.42

6. The Department declines to rule on whether Construction Affiliate must pay local use taxes
   if the prefabricated housing modules are used in the construction of homes at a building site in a jurisdiction different from where the sale of the prefabricated housing modules was sourced. Your request logically proceeds next to question whether Construction Affiliate must pay local use taxes if the prefabricated housing modules are used in the construction of homes at a building site in a jurisdiction different from where the sale of the prefabricated housing modules was sourced. The Department is required to issue private letter rulings at the request of a taxpayer in most circumstances.43 However, by definition, a private letter ruling is limited to a written determination “on the tax consequences of a proposed or completed transaction under any tax administered by the department pursuant to section 39-21-102. . . .”44 Except for the use taxes imposed upon motor vehicles and collected pursuant to section 39-26-208, C.R.S., the use taxes imposed pursuant to section 29-2-109, C.R.S., are collected, administered, and enforced by the city, town, or county imposing them.45 Because it lacks the authority to do so, the Department declines to issue a private letter ruling on this question.
7. The conveyance of the completed home to its ultimate owner is not subject to state and
   state-administered local sales tax.
   Colorado imposes a sales tax on most sales of tangible personal property at retail, as well as certain services.46 The term “tangible personal property” does not include real property, such as land and buildings.47 At various building sites, Construction Affiliate incorporates the prefabricated housing modules sold to it by Taxpayer onto building foundations that have been prepared for that purpose. Construction Affiliate then conveys the completed residences to either individual customers that will use them as their primary home residence, or to entities (including Internal Revenue Code § 501(c)(3) tax-exempt entities) that will make them available to individuals and families for residential use. When conveyed to Construction Affiliate’s customers, the prefabricated housing modules have become an integral and inseparable part of the realty. Therefore, the conveyance is not subject to state or state-administered local taxes, which apply only to the sale of tangible personal property and certain services.48 Miscellaneous This ruling is premised on the assumption that Taxpayer has completely and accurately disclosed all material facts, that all representations are true and complete, and that Taxpayer has otherwise complied with the requirements of section 24-35-103.5, C.R.S., and the rules 41 Id. at (3)(a)(V). 42 Sections 39-26-104(1)(a) and 39-26-721(1), C.R.S. 43 Section 24-35-103.5(2), C.R.S. 44 Id. at (1)(b). 45 Section 29-2-106(3)(a), C.R.S. 46 Section 39-26-104, C.R.S. 47 1 CCR 201-4, Rule 39-26-102(15)(2)(a). 48 See sections 39-26-104(1)(a), C.R.S. and 29-2-105(1)(d), C.R.S.

statutes as described in note 8, above.

For special districts, refer to the enabling

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promulgated pursuant thereto. The Department reserves the right, among others, to independently evaluate Taxpayer’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. As discussed above, 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.