Is a company that processes card payments for online merchants — and briefly takes 'flash title' to the goods — a retailer that must collect Colorado sales tax?

Plain-English summary

A company that provides card payment processing and fraud detection for international e-commerce merchants asked the Colorado Department of Revenue whether it counts as a seller that has to collect Colorado sales tax. The twist: under one of its older setups ("Model A"), the payment networks' rules forced the company to briefly take title to the goods — a so-called "flash title" — even though it never touched, shipped, or sold the products. Under "Model B" it never held title at all and was purely a payment collection agent.

The Department looked past the contract labels to what the company actually did, and ruled in the company's favor across the board:

• It is not a retailer. A retailer is "a person doing business in this state known to the trade and public as such, and selling to the user or consumer, and not for resale." On these facts the company was not doing business in Colorado as a retailer and was not known to the public as one — so it is not a retailer making sales under § 39-26-102(10), C.R.S., and not a retailer doing business in Colorado under § 39-26-102(3), C.R.S.
• It is not a marketplace facilitator — it does not operate a marketplace, even though it contracts with third parties to collect and transmit payment.
• It is not a consignee, auctioneer, salesperson, representative, or peddler. The transactions weren't auctions, and mere payment processing isn't enough to make it any of these.
• The "flash title" didn't change the result. Because the company wasn't a retailer even under Model A, the Department declined to decide the separate question of whether the "true object" of Model A transactions was the company's services.

Bottom line: the company is not liable for collecting or remitting Colorado sales tax on the merchants' sales. The merchants themselves remained responsible for sales tax, as their service agreements with the company spelled out.

What this means for you

Payment processors and fintech companies

Briefly taking "flash title" to goods to satisfy payment-card-network rules does not, by itself, turn you into a Colorado retailer responsible for sales tax — when your real role is payment processing and you don't market, possess, ship, or sell the goods. The Department weighed the substance of the relationship (no website, no inventory, name not on invoices, merchant solely responsible for tax) over the title-taking contract language. The facts that mattered: you don't operate a marketplace, you don't control the merchant's pricing or tax determinations, and you have no involvement in fulfillment.

E-commerce merchants who use a processor

This ruling reinforces that the merchant — not the payment processor — is responsible for sales tax on its own sales. If your processor's contract says it briefly takes title, that alone doesn't shift the sales-tax collection duty to the processor. Don't assume your processor is collecting Colorado tax for you.

Marketplace operators and accountants

Note the line the Department drew on "marketplace facilitator": contracting with third parties to collect and transmit payment is not enough; you must actually operate a marketplace to be a facilitator under § 39-26-102(5.9)(a), C.R.S. The ruling also shows the Department will decline to reach a secondary issue (here, the Model A "true object" test) once the threshold "are you a retailer?" question is answered no.

Common questions

Q: Does briefly holding "flash title" to goods make a payment processor a retailer?
A: Not on these facts. The Department looked at what the company actually did — processing payments, with no marketing, possession, shipping, or sale of the goods — and concluded it was not a retailer even under the model where it took flash title.

Q: So who has to collect the sales tax — the processor or the merchant?
A: The merchant. The company is not liable for collecting or remitting Colorado sales tax, and its agreements made the merchants responsible for collecting, remitting, and administering sales and use taxes.

Q: Is a payment processor a "marketplace facilitator"?
A: Not here. A marketplace facilitator must operate a marketplace. Contracting with third parties to collect and transmit payment is not enough to make a company a marketplace facilitator.

Q: Why didn't the Department answer the "true object" question for Model A?
A: Because it had already concluded the company wasn't a retailer under Model A, so the separate question of whether the transaction's true object was the company's services didn't need to be reached.

Q: Does this ruling apply to my company?
A: Not automatically. A private letter ruling is binding on the Department only for the taxpayer and facts it was issued to, and it explicitly cannot be relied on by any other taxpayer. It shows how the Department reasons, but your facts may differ.

Q: Does this cover home-rule city taxes?
A: No. The Department administers state and state-administered local sales and use taxes only. Colorado's self-collected home-rule cities set and administer their own taxes, so they aren't covered here.

Citations and references

Statutes and rules:
- § 39-26-102(8), C.R.S. (definition of "retailer")
- § 39-26-102(10), C.R.S. (definition of "sale")
- § 39-26-102(3), C.R.S. ("doing business in this state")
- § 39-26-102(5.9)(a), C.R.S. (definition of "marketplace facilitator")
- § 39-26-102(1.3), C.R.S. (auctioneers and consignees treated as retailers)
- § 39-26-104, C.R.S. (imposition of sales tax)
- § 39-26-105(1)(a)(I)(A), C.R.S. (retailer's duty to collect and remit)
- § 39-26-106(1)(a)(II), C.R.S. (imposition of the tax)
- § 39-26-105(1.5)(a), C.R.S. (marketplace facilitators treated as retailers)
- 1 CCR 201-5, Special Rule 8 (marketplace facilitators)
- 1 CCR 201-1, Rule 24-35-103.5 (private letter ruling procedure)

Source

• Landing page: Colorado Sales & Use Tax Letter Rulings
• Original PDF: PLR-26-003.pdf

Original ruling text

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

PLR 26-003
March 16, 2026
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
Via Electronic Mail: XXXXXXXXX
Re: Flash Title Transfers in Payment Processing
Dear XXXXXXXXX:
You submitted a request for a private letter ruling on behalf of XXXXXXXXX (“Company”), 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 the true object of Model A transactions was Company’s services.
2. Whether Company is a retailer making sales under section 39-26-102(10), C.R.S., insofar as it
participates in Model A or Model B transactions.
3. Whether Company is a retailer doing business in Colorado under section 39-26-102(3), C.R.S.,
insofar as it participates in Model A or Model B transactions.
4. Whether Company is a marketplace facilitator, insofar as it participates in Model A or Model B
transactions.
5. Whether Company is a consignee or auctioneer, insofar as it participates in Model A or Model B
transactions.
6. Whether Company is a salesperson, representative, or peddler, insofar as it participates in Model
A or Model B transactions.
Conclusions
1. The Department declines to answer the question of whether the true object of Model A
transactions was Company’s services.
2. Company is not a retailer making sales under section 39-26-102(10), C.R.S., insofar as it
participates in Model A or Model B transactions.
3. Company is not a retailer doing business in Colorado under section 39-26-102(3), C.R.S., insofar
as it participates in Model A or Model B transactions.
4. Company is not a marketplace facilitator, insofar as it participates in Model A or Model B
transactions.

PLR 26-003
March 16, 2026
Page 2
5. Company is not a consignee or auctioneer, insofar as it participates in Model A or Model B
transactions.
6. Company is not a salesperson, representative, or peddler, insofar as it participates in Model A or
Model B transactions.
Background1
Company is organized in XXXXXXXXX and is engaged in business in providing card payment processing
services and fraud detection to international e-commerce merchants (“Merchants”) who sell their
merchandise or services to end-customers (“Customer”) in countries other than the Merchant’s home
countries.
Company previously provided its card processing services under two different legacy models – Model A
and Model B. These models were implemented in order to meet requirements imposed by payment card
networks.
As Company was providing a new type of payment localization service, the way Company facilitated
international payments did not clearly fit into any available account designations offered by the payment
networks within their frameworks. Lacking a clear option, and needing to be categorized within the
already-existing scheme, Company concluded that the “merchant account” categorization of the payment
networks most closely aligned with its payment flow model. Company’s models were, therefore, tailored to
comply with the applicable merchant rules (e.g., merchant account holders were required to take title to
goods) so that Company could continue to accept payment methods offered by the payment card
networks. Notwithstanding this, Company’s actual role in the sales by Merchants to Customers was
largely limited to merely acting as a traditional payment processor.
The main differentiator between the two models for purposes of this request is that, under Model A,
Company took title for a very brief time (“flash title”) to the goods sold by Merchants to Customers. In
contrast, under Model B, Company did not hold title at any time to any goods being sold and merely acted
as a payment collection agent.
Below is a summary of the key relevant characteristics of Company’s relationship with the Merchants that
are applicable to both models:
1. Company’s service agreements with Merchants included a paragraph stating that the Merchants
were responsible for collecting, remitting, and otherwise administering any and all sales or use
taxes.
2. Company did not have a website where Customers could browse, select, and purchase a
Merchant’s goods or services. Company was not in the business of making sales itself—other
than sales of its payment processing service. Company did not engage in any solicitation of the
items owned by the Merchants via any communication medium for the purpose of effecting the
sale of such items.
3. Company had no control over Merchants’ e-commerce platforms for purposes of correctly
applying sales tax based on sourcing rules, collecting or maintaining exemption documentation,
or otherwise administering sales taxes in any way. Company was provided with some transaction
level data, but not 100% of the time and not enough to make an informed tax assessment of the
products or services sold.
4. Company had no responsibility for Merchant’s websites displaying the goods available for sale,
integrating systems for the catalog of products, pricing, establishing and maintaining customer
1

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 initial request or in any supplement or amendment thereto,
which is not an indication that the Department found such facts relevant to its analysis. Some relevant facts may be redacted or
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 26-003
March 16, 2026
Page 3

5.

6.
7.
8.

accounts, applying discounts and promotions, receiving and processing orders (aside from the
payment processing services provided by Company), liability for defective products, or any other
aspects of the retail relationship with the end customer. The Merchant was solely responsible for
the accuracy of all product information displayed on Merchants’ websites.
Company’s name was not on any invoice or bill of lading for the items sold by the Merchants, and
Company was not listed as an exporter or importer of record for such transactions. The only
documentation related to the payments processed where Company's name was mentioned was
in regard to the payment card networks and was generally listed along with the Merchant's
name.
Company never had any actual or constructive possession of the goods or inventory that were
the subject of the sales by the Merchants. The Merchants handled all shipping and fulfillment of
the goods and were responsible for all fees associated with inaccurate orders or replacements.
Company had the risk of fraud for the transactions but had no other responsibility to the Customer
or Merchant's banks for refunds, shipping, replacing the products, or risk for delays or cancelled
orders.
Company did not control, participate in, assist with, facilitate, or otherwise have any involvement
in any of the activities that were typical of a retail vendor making retail sales to customers.

A typical transaction under either Legacy Model would generally function as follows:
1. A Customer selects the products they wish to purchase from the Merchant and puts them in a
digital shopping cart on the Merchant's website. In the Merchant's digital shopping cart, applicable
taxes and delivery fees would be added to the total purchase price. However, pursuant to service
agreements between Merchant, determination of tax collection obligations is made by each
Merchant independently.
2. In response to an electronic request by a Merchant for a transaction, Company routes the
requested transactions through their systems.
3. The Customer then enters their payment information into the Merchant's website. When the
Customer enters their information, a notice (referred to as a "badge") appears to notify the
Customer that they are transacting via Company. This badge is no different from what Customer
would see if they were transacting with another payment facilitator. Once the Consumer's
payment information is verified by Company, the transaction is deemed to be executed.
4. The Merchant then ships the goods to the Customer and handles all product-related needs that
may follow.
5. Once the transaction has been settled, Company is paid by the Merchant based on a percentage
of the volume of sales processed by Company. The percentage can vary depending on the
payment type and the countries that the transaction is dealing in.
Company's Technology and the Customer Experience
In this section, relevant components of Company's technology are described to show how the technology
operated in the background of the Merchant's website and what the Customers experienced.
Generally, Company's payment processing system platform integrates with the Merchant's e-commerce
platform, but only to the extent it is necessary for Company to provide its payment processing services.
Customers have little knowledge that Company is involved in the transactions, as shown by how the
Customers pay, what the Customers see on their bank statements, and the lack of Customer support
activities provided by Company.
Company provides Merchants with an application programming interface (API) that integrates with the
Merchant's e-commerce platform. Once integrated, the API can then identify certain transactions where
Company's services are applicable and apply the relevant foreign exchange rates to the products in the
Customer's home currency. When a Customer navigates to a Merchant's website, Company's API
identifies what country the Customer is in and what country the Merchant is in. Utilizing Company's API,

PLR 26-003
March 16, 2026
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the Merchant's website then displays the prices of the Merchant's products in the Customer's home
currency using information provided by Company. Although Company's API is integrated with the
Merchant's e-commerce platform to identify and route certain transactions for the purpose of currency
conversion, this does not allow Company control over the Merchant's e-commerce system or pricing in
any way.
Once a Customer has selected the products they want to purchase and are ready to check out, they will
be directed to the Merchant's digital shopping cart. After the Customer has entered a delivery address,
the Merchant will then add any applicable sales tax and delivery fees to the total. This total amount due,
which includes taxes and fees, is part of the information that is sent to Company so they may help
facilitate payment for the transaction. According to agreements between Merchant and Company, the
Merchant is solely responsible for determining the application of sales taxes to the transactions as it is the
only party that has the full set of information necessary to make such a determination (e.g., taxability,
exemption documentation, etc.) and control over the Merchant's digital shopping cart to be able to add
sales tax to the transaction. This is the case for both Legacy Models.
When the Customer comes to the point where they are required to pay the Merchant for the goods, the
Customer enters their payment details via the Merchant's website which are then forwarded on to
Company to process the payment via Company's API. On the Merchant's checkout page, there is a
hyperlink labeled "Terms of Service" at the bottom that, if clicked on, would bring the Customer to
Company's terms of service. Customers can choose to view Company's terms of service if they wish but
are not required to view or acknowledge Company's terms of service to complete the transaction. Once
the transaction is complete, a charge will appear on the Customer's billing statement with information
about both Company and the Merchant.
In the payment card industry, there are what's known as "hard descriptors" and "soft descriptors," which
collectively comprise the line of text explaining a transaction on a Customer's billing statement. The hard
descriptor is required to indicate the owner of the bank account to which the Customer's funds are sent.
Because Company owns the bank account where the Customer's payment is initially sent, Company
appears on the Customers' credit card statement as a hard descriptor. For most of Company's history, the
hard descriptor used for transactions processed by Company was Company's name abbreviated as "CO."
A soft descriptor will appear on a Customer's credit card statement almost immediately after the charge
has been made. This soft descriptor is subject to changes and shows a pending amount and preliminary
description. This preliminary description generally lists the Merchant as the vendor of the products or
services instead of who owns the bank account where the payment is sent to. In Company's case, the
soft descriptor would show the Merchant's name whose website the Customer ordered from.
Once the transaction is settled, the description appearing on a Customer's billing statement will include
Company's hard descriptor (“CO”) first followed by the Merchant's soft descriptor name. For example, a
purchase from a Merchant named "ABC Company" using Company's payment processing services would
appear on the Customer's billing statement as “CO - ABC Company (CA-555-666-7788)."
After a Customer receives the products shipped by the Merchant, they may wish to return the item, seek a
refund, or require some other support from the Merchant regarding their purchase. Under both Legacy
Models, the Merchants are solely responsible for all customer service matters, other than payment related
queries, including approving and issuing refunds as well as all fees related to returning the item. Other
times, a Customer will dispute a charge on their credit card due to fraud and the charge will be reversed.
This reversing of a charge is what is known as a "chargeback." Company is only liable for chargebacks
that are the result of fraud.
If a Customer has a question about their order, they may call a customer service line. Company is
required to provide telephone support to comply with payment card network protocols. However, because
Company is not involved in the fulfillment of orders and has little knowledge of what was sold, Customers

PLR 26-003
March 16, 2026
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are immediately re-routed to the Merchant's customer service support telephone number to resolve any
and all issues related to the transaction.
Throughout this process, Company's role and existence is largely invisible to the Customer but for the
Terms of Service hyperlink on the Merchant's payment page and what they see on their credit card billing
statement. The Customer proceeds through the transaction with the understanding that they are doing
business with the Merchant. While Company's contract with the Merchant may describe a more
substantial role in the transaction, it is important to understand that contractual language is merely
present to conform to payment card network rules but does not reflect Company stepping into the role of
the retailer in any way.
Discussion
Insofar as Company participates in Model A or Model B transactions, Company is not a retailer and is not
liable and responsible for collecting and remitting state sales tax. A retailer is “a person doing business in
this state known to the trade and public as such, and selling to the user or consumer, and not for resale.”2
Colorado imposes a sales tax on most sales of tangible personal property at retail, as well as certain
services.3, and retailers are generally liable and responsible for collecting and remitting this tax. 4
Under the facts presented by Company, Company is not doing business in this state and is not known to
the trade and public as a retailer insofar as it participates in either Model A or Model B transactions.
Company is, consequently, neither a retailer making sales under section 39-26-102(10), C.R.S., nor a
retailer doing business in Colorado under section 39-26-102(3), C.R.S. Therefore, Company is not liable
and responsible, pursuant to section 39-26-105(1)(a)(I)(A), C.R.S., for collecting and remitting the tax
imposed by section 39-26-106(1)(a)(II), C.R.S. Because Company is not a retailer insofar as it
participates in the Model A transactions, the Department declines to address whether the true object of
Model A transactions was Company’s services.
Insofar as Company participates in Model A or Model B transactions, Company is also not a marketplace
facilitator, a consignee, or an auctioneer, nor is it a salesperson, representative, or peddler. Marketplace
facilitators, consignees, and auctioneers are retailers for the purposes of collecting and remitting the state
sales tax.5 A marketplace facilitator operates a marketplace and contracts with marketplace sellers to
collect and transmit payment.6 Because Company does not operate a marketplace, Company is not a
marketplace facilitator, even if it contracts with third-parties to collect and transmit payment.7 Based on
Company’s facts, neither Model A nor Model B transactions qualify as auction sales, and therefore
Company is not acting as an auctioneer insofar as it participates in them.8 Similarly, we conclude that
company is not a consignee, salesperson, representative, or peddler based upon the facts presented.
The payment processing activities described above are not sufficient to classify Company as such.
Miscellaneous
This ruling is premised on the assumption that Company has completely and accurately disclosed all
material facts, that all representations are true and complete, and that Company has 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’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
2

Section 39-26-102(8), C.R.S.
See section 39-26-104, C.R.S.
4
Section 39-26-105, C.R.S.
5
Sections 39-26-102(8) and 39-26-105(1.5)(a), C.R.S.; 1 CCR 201-5, Special Rule 8.; Section 39-26-102(1.3).
6
Section 39-26-102(5.9)(a), C.R.S.
7
Section 39-26-102(5.9)(a), C.R.S.
8
Section 39-26-102(1.3), C.R.S.
3

PLR 26-003
March 16, 2026
Page 6
binding on the Department, and is subject to modification or revocation, in accordance with 1 CCR 201-1,
Rule 24-35-103.5.
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.