Colorado State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Colorado, with full citations and the original source on every page.
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Is electricity used to power computers that write and test software exempt from Colorado sales tax as manufacturing or industrial use?
It depends on whether the broader activity is genuine manufacturing or industrial use. Electricity for commercial use is taxable, but electricity for manufacturing or industrial use is exempt…
When an affiliated group's members must use different apportionment formulas (trucking, airlines, financial institutions, general), how does the group compute its combined Colorado income tax?
The affiliated group may use the subgroup methodology from the Department's prior rulings PLR-11-002 and PLR-15-005: financial and non-financial members eliminate all intercompany transactions, each…
How are service agreements, shipping, restocking fees, and resale certificates taxed on sales of medical imaging equipment in Colorado?
It depends on separability. A separate, optional service agreement on medical imaging equipment isn't taxed (the servicer pays tax on parts it uses) — but if it charges the customer for parts, it…
Is a company's charge for designing, printing, and distributing door-hanger marketing materials subject to Colorado sales tax?
Largely yes. A company that designs, prints, and distributes door-hanger marketing material is selling tangible goods — the printed material is the 'true object' — so a lump-sum charge is taxable.…
Are fluoride varnish and oral-health kits sold to dental and medical providers exempt from Colorado sales tax?
Likely yes — but not as a prescription drug. The FDA classifies fluoride varnish as a Class II medical device, not a drug, so it doesn't qualify for Colorado's prescription-drug exemption. It does,…
Is an optional maintenance agreement bought with a vehicle lease subject to Colorado sales tax?
The Department discusses an optional maintenance agreement under separability and separate-statement rules but makes no specific determination. The described facts included both a separate agreement…
When a lessor replaces or adds equipment on a long-term lease with under three years left, is it still a long-term lease or a new short-term lease?
It depends on whether you replace or add. Replacing existing equipment on a long-term lease (over three years) keeps it a long-term lease — you keep collecting tax on each lease payment — even if…
Are wood pellets sold for home heating exempt from Colorado sales tax?
Yes. Wood pellets bought for residential use are exempt from Colorado state sales tax. Wood pellets are wood, and wood sold for residential heating (stoves, space heaters, and other domestic fuel…
Is a $1-buyout computer lease to a student taxable, and does the schools exemption apply?
Taxable. A computer 'lease' to a student that lets the student buy the equipment for $1 at the end is really a credit sale (a financed purchase), which is taxable — and even if it were a true lease…
Must a seller collect tax on audio/visual equipment sold to a contractor who presents a contractor's exemption certificate?
When a contractor working for an exempt entity (government, charity, or school) buys audio/visual equipment, the sale is exempt — and the retailer may accept either the contractor's exemption…
If a digital marketplace collects and remits Colorado sales tax on its third-party sellers' sales as a 'jointly responsible' retailer, does that relieve the third-party sellers of liability — and are both relieved when a buyer presents an exemption certificate naming the marketplace as seller?
Largely yes. When a marketplace collects and remits Colorado sales tax on its third-party sellers' sales as a 'jointly responsible' retailer (an agent the Department may treat as jointly liable…
After an out-of-state buyer restructures the ownership, is a holding company's gain from selling its partnership interest included in Colorado's apportionment factor?
On these facts, no. The gain is business income (the holding company's whole business was buying, holding, and selling the investment), and the company includes its distributive share of the…
Is a long-term lease of aircraft to a Colorado operator that the FAA authorizes as an on-demand charter/air-taxi service exempt from Colorado sales and use tax under either aircraft exemption?
Likely taxable — neither aircraft exemption appears to fit. A long-term aircraft lease (over 3 years) is treated as a taxable sale, with tax on the lease payments. The first exemption (§ 39-26-711)…
Is a fleet repairer's 'management fee' — charged for online access to its maintenance database/reports — subject to Colorado sales tax, and does it matter that the fee is separately stated from parts and labor?
It turns on whether the fee is optional. A fleet maintenance company's 'management fee' gives clients online access to its maintenance database — application service provider (ASP) software, which…
Is a company's monthly fee for medical credentialing services — collecting documentation, preparing applications, and obtaining insurer credentials for a provider's billing staff using cloud-based software — subject to Colorado sales tax?
No, on these facts. Medical credentialing — collecting documentation, creating profiles, preparing applications, and obtaining the credentials a provider's billing staff need to bill insurers —…
Is the electricity and natural gas a TV news station uses to produce and broadcast its programming exempt from Colorado sales tax — as energy used in 'radio communication' or as 'industrial' use?
Only partly. Energy used to power the TV broadcast TRANSMITTER appears to be EXEMPT under the 'radio communication' energy exemption — the Department reads the 1937 'radio communication' term to…
Were web conferencing and related call-connection charges taxable in Colorado when the provider’s servers were out of state?
No, on these facts. Colorado viewed the described conferencing and related call-connection services as interstate because participants bought separate connections to the company’s out-of-state…
Does Colorado PLR 14-006 still make retirement-community meals taxable after July 1, 2016?
No. Colorado revoked PLR 14-006 effective July 1, 2016, after legislation exempted qualifying retirement-community food, meals, and packaging. The Department did not decide whether this particular…
Does a multi-level marketing company owe sales tax on the annual renewal fee its distributors pay to stay active, and on the fee for its online Dashboard and personal-website tools?
The Department discusses conditional treatment of an MLM renewal fee and a Dashboard fee but makes no specific determination. The Dashboard result depends on hosted ASP access versus delivered…
Are advance payments and reservation fees for a short-term car rental subject to Colorado sales tax — including when the customer never shows up — and does it matter whether the payment is refundable?
It depends on whether the payment is refundable and how big it is, by analogy to hotel deposits. Any advance payment that's actually applied to the rental charge is taxable. A NONREFUNDABLE advance…
Are custom herbal formulas that a licensed acupuncturist prepares and sells to clients exempt from Colorado sales tax as prescription drugs, nonprescription drugs, or materials furnished by a licensed provider?
They're taxable. Custom herbal formulas an acupuncturist prepares and sells do NOT qualify for Colorado's medical exemptions for prescription drugs, nonprescription drugs, or materials furnished by…
Does Colorado sales tax apply to charges for a live web seminar, a pre-recorded webinar, and a self-study course delivered over the web?
It splits three ways by how 'live' the instruction is. A charge to attend a LIVE web seminar is NOT taxable — it's a service, because a live instructor is providing educational services. A charge to…
Is the 'into-plane fee' for transporting aviation fuel from the airport fuel farm to a customer's aircraft subject to Colorado sales tax when the customer buys the fuel from one company but contracts separately with a different fixed-base operator for the fueling service?
No, on these facts. The 'into-plane' fee — for moving fuel from the airport fuel farm into the customer's aircraft — is a nontaxable service here, because the customer buys the taxable fuel from one…
When a vacation-rental booking agent takes a commission out of what the guest pays for a Colorado short-term rental, is sales/lodging tax calculated on the full amount the guest paid, including the agent's commission?
Yes. When a booking agent collects a guest's payment for a Colorado short-term rental and keeps part of it as commission before forwarding the rest to the property manager, the lodging sales tax is…
Which hotel group-contract fees (early departure, room and food-and-beverage attrition, cancellation, no-show, meeting-room cancellation) are subject to Colorado sales/lodging tax, and is the tax on an online-travel-company booking figured on the lower contract rate or the higher website rate?
It depends on the fee. Early departure, no-show, and cancellation fees are cancellation charges judged by the '50% rule': if the charge is more than 50% of the daily room rate it's taxable as…
If a retailer charged sales tax on mandatory shipping and a customer returns the goods for a full refund of the item price but not the shipping, must the retailer refund the sales tax it collected on the shipping charge?
Yes. When a retailer refunds the customer the full purchase price of returned goods but keeps the mandatory shipping charge, it must also refund the sales tax it collected on that shipping charge.…
Does an out-of-state franchisor have Colorado sales- or income-tax nexus, and which of its franchise revenues count toward the income-tax thresholds?
The Department wouldn't decide sales-tax nexus—too fact-intensive for a general letter. For income tax, a company has nexus if it exceeds Public Law 86-272 and meets any one threshold ($50,000…
Does a Colorado nutritional-products seller have to charge state sales tax on aloe drinks, fiber powders, a protein bar, and soy nuts that carry a 'Nutrition Facts' label?
No. The six nutritional products here — aloe drinks, a fiber powder, a protein bar, and roasted soy nuts — are all exempt from Colorado state sales tax as food, because each carries a 'Nutrition…
Do donations to a fund that grants money to licensed child care centers—rather than to a child care facility directly—qualify for Colorado's child care contribution credit?
Yes, in part. Donations to an intermediary fund qualify for the § 39-22-121 child care contribution credit when the fund ultimately uses them 'for the establishment or operation of a child care…
Is a digital copier's 'per-click' maintenance charge — which bundles labor with toner and staples and is priced by pages printed — subject to Colorado sales tax when the customer uses the copier to make printed items it then resells?
Not on these facts. A copier 'per-click' fee that bundles maintenance labor with consumables (toner and staples) is not subject to Colorado sales tax when the customer uses the copier to make…
Are licensed digital movies and the hard drives they arrive on taxable tangible personal property, and who owes the tax?
Yes. Both the digital movies/content and the computer hard drives a theater receives from film distributors are taxable tangible personal property — digital goods have a physical existence, and…
Is a permanent transprostatic implant sold to hospitals exempt from Colorado sales tax as a prosthetic device or as material furnished by a provider?
Yes, it's exempt — on two independent grounds. The permanent transprostatic implant (which corrects BPH by reopening the urethra) qualifies as an exempt prosthetic device because it replaces the…
Are e-books, self-study online courses, and instructor-critiqued virtual lessons subject to Colorado sales tax?
It splits three ways. E-books are taxable digital goods (tangible personal property you can download and print). Self-study online courses — written material and videos with no instructor…
When a Colorado resident sells an interest in a multistate pass-through and another state taxes the gain, how is Colorado's credit for taxes paid to another state figured?
The resident gets a credit, but Colorado uses its own sourcing rules, not the other state's. To find the gain 'derived from sources' in the other state, the seller applies a three-year average of…
Is a hotel's mandatory amenity fee taxable, and who collects the tax when a middleman arranges the amenities?
Yes, the guest's amenity fee is taxable — but only at the hotel level. Because the fee is mandatory and built into the room price (the true object is the room), the whole lodging charge is taxable,…
Are outsourced paper and electronic billing services subject to Colorado sales tax, even though a paper bill changes hands?
No. Outsourced paper and electronic billing services are a nontaxable service in Colorado, and the paper bill that changes hands is just an incidental transfer of property tied to that service — so…
Is the electricity a company produces and consumes at its own facilities subject to Colorado sales or use tax?
No. The electricity this company produces and consumes at its own facilities is not subject to Colorado sales or use tax, because there is no 'sale.' Colorado taxes electric service only when it is…
Are annual software-update fees and software maintenance agreements taxable in Colorado when the software is delivered electronically — even if the underlying software was taxable when it was bought before July 1, 2012?
No. Software updates and maintenance agreements that are delivered electronically and bought after July 1, 2012 are not subject to Colorado sales or use tax, because electronically delivered…
Does an out-of-state company owe Colorado income tax just because one of its sales representatives lives in Colorado?
Not necessarily. The company is an LLC taxed as an S corporation, so the entity itself owes no Colorado income tax, but its shareholders must file Colorado returns if the company does business…
Does a photographer have to charge Colorado sales tax on photos delivered digitally over the Internet rather than as prints?
Yes, taxable. Colorado treats digital photographs as tangible personal property, so a photographer must charge sales tax on them — whether delivered as prints, on a CD/DVD/flash drive, or…
On a long-term motor-vehicle lease, does the lessee owe Colorado sales or use tax on the lessor's monthly charge for an optional, separately stated maintenance agreement?
No. Because the maintenance agreement is optional and separately stated, the lessee does not owe Colorado sales or use tax on the lessor's monthly maintenance charge. Instead, the lessor (or its…
Is a separately stated charge to install a custom-made, freestanding closet organizer into a customer's home included in the Colorado sales/use tax calculation?
Yes, on these facts. The separately stated 'installation' charge for a custom-made closet organizer is included in the sales/use tax calculation. The product is made to order and isn't finished…
A nonprofit client holds a 'state sales/use tax only' exemption certificate — does that exemption also cover special district, city, and county taxes on construction materials?
It reaches state-administered local taxes too, but not home-rule. Construction and building materials a contractor buys for a structure owned and used by a charitable organization (or government or…
In a sale-and-leaseback, when do the purchase, the resale to the lessor, and the lease-back get taxed — and does the lease term change the answer?
It depends on the lease term. The lessee's original purchase is a tax-free wholesale (resale) buy only if it really resells to the lessor without using the property first. On the lease-back: if the…
Does a city's 10-cent disposable bag fee get added into the sales tax base when a customer buys taxable goods?
No. A municipal disposable bag fee (here, 10 cents per bag charged to the customer and collected by the retailer) is not subject to state sales or use tax. The retailer gives the bag away free of…
Can a tissue-distribution business buy its surgical equipment and supplies tax-free as medical exemptions, and is the rent it charges for meeting space taxable?
Mostly taxable here. Colorado's medical-equipment and -supply exemptions apply only when the item is bought pursuant to a prescription or furnished by a licensed provider as part of professional…
Is audiovisual equipment a 'construction and building material,' and can a contractor buying it for a tax-exempt project use the contractor's exemption certificate?
Generally no. Audiovisual equipment usually isn't a 'construction and building material' (it's removable, not a fixture), so the Department would treat an A/V installer as a retailer reselling the…
How should a propane (LPG) distributor report purchases and sales—gross gallons or net gallons—when suppliers don't give it the data to compute gross gallons?
Colorado's LPG excise tax is imposed per gross gallon, but House Bill 15-1228 (2015) changes reporting to a net-gallon basis effective January 1, 2016. Because the legislature signaled a preference…
How should a debt-collection company that buys charged-off receivables apportion its income when it fits none of Colorado's standard receipt categories?
The Department treated this charged-off-debt buyer as a service provider for cost-of-performance sourcing on its stated facts. It called that treatment unusual and signaled a prospective rule…
Are single-serve condiment packets (butter pads, jelly, creamers) taxable when a restaurant buys them from a wholesaler, and does it matter how the restaurant hands them out?
Taxable. Individually wrapped butter pads, jelly packets, half-and-half creamers, and similar single-serve condiments are 'nonessential food articles' — they're for the customer's convenience and…
Is a monthly charge to lease unlit 'dark' fiber optic cable subject to Colorado sales or use tax?
Likely taxable. The Department's general understanding is that dark fiber — unlit fiber optic cable leased to a customer that must 'light' it themselves — is tangible personal property, not real…
Are replacement batteries for electric wheelchairs exempt from Colorado sales tax as repair/replacement parts for mobility enhancing equipment, and what documentation must the retailer keep?
Yes, with a prescription. A replacement battery for an electric wheelchair, motorized cart, or scooter is exempt as a component/replacement part of mobility enhancing equipment — but only when the…
Can a plumber who uses both lump-sum and time-and-material contracts just pay sales tax on materials at purchase for every job, even when billing time-and-material, if it never marks up the materials?
No. A contractor on a lump-sum contract pays tax on materials at purchase; a contractor billing time-and-material must collect tax from the customer on the materials, which requires a sales tax…
When a commercial airline gets a federal-excise-tax refund on aviation fuel, can it also recover the Colorado sales tax it paid on that refunded excise-tax amount?
Yes. The federal excise tax that gets refunded to a commercial airline acts more like a refundable deposit than part of the fuel's purchase price, so Colorado sales tax paid on that refunded portion…
Is acquiring tangible personal property by foreclosing on a security interest a taxable sale, and is manufacturing machinery used in an enterprise zone exempt?
Two answers. A lender taking possession and title of property by foreclosing on its security interest is NOT a taxable sale (the statute excludes foreclosure/repossession) — but if the lender later…
Is a restaurant's separately stated delivery charge taxable when the customer is never told there's a delivery fee they could avoid by picking up the meal?
Taxable here. A delivery charge escapes sales tax only if it's both (1) separable from the sale and (2) separately stated in a way the customer actually knows about before buying. This restaurant's…
Which banquet and event charges — guarantees, room setup, extra labor, off-site fees, below-minimum fees, IT/router, electricity, and audiovisual rentals — does Colorado sales tax apply to?
It depends on the charge. Fees tied to catering prepared meals — room setup, extra labor, below-minimum, and hotel-billed off-site fees — are taxable as part of the meal. Audiovisual equipment…
Are a company's medical-records services — coding, abstraction, and secure online storage — subject to Colorado sales or use tax?
No. The Department reaffirmed its earlier PLR 13-005 view that retrieving and copying medical records is a service, not a sale of tangible personal property. So coding, abstraction, and secure…
If a buyer paid sales tax on a mandatory car warranty that was later wiped out in the manufacturer's bankruptcy, can the buyer get a sales-tax refund on replacement parts they then had to pay for?
No. Sales tax is a transactional tax fixed when each deal is made. The mandatory warranty was properly taxed when the car was bought, and its later discharge in the manufacturer's bankruptcy doesn't…
Does Colorado's low-emitting heavy-vehicle exemption carry through to a long-term lease, and who is the 'dealer' that completes Form DR 1369?
Yes. Because a long-term lease (over three years) is treated as a sale, the low-emitting heavy-vehicle exemption flows through to the lease payments. The 'dealer' for Form DR 1369 is whoever sells…
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These are official tax letter rulings and advisory opinions issued by Colorado's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.