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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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 Facts…
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 facili…
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 printed …
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 Colora…
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 block…
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 interaction …
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 the …
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, an…
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 th…
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 fu…
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 software …
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 here—me…
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 electronical…
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 third…
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 until …
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 sc…
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 le…
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 char…
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 servi…
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 equ…
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 fo…
How should a debt-collection company that buys charged-off receivables apportion its income when it fits none of Colorado's standard receipt categories?
As a service provider. The company isn't a 'financial institution' (it doesn't handle financial transactions or provide financial services, isn't a bank, and doesn't earn over 50% from finance leases)…
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 aren…
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 prope…
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 equ…
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 licens…
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 s…
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 se…
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 fe…
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 rentals…
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 online …
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 u…
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 or …
When a company builds and tests a custom piece of equipment in Colorado that it intends to sell, are the components subject to Colorado use tax during the design, build, and test process — and what happens if the company ultimately keeps the equipment to use itself?
On these facts, no use tax during development. Components a company builds into a custom piece of equipment and tests in Colorado are NOT subject to Colorado sales or use tax during the design, build,…
Does Colorado sales tax apply to a late-payment fee a seller charges when a customer pays an invoice late?
No. A late-payment fee is not included in the sales tax calculation as long as it is separately stated from the purchase price. Sales tax is a transactional tax fixed when the sale is created, and a l…
Are bulk water sales subject to Colorado sales or use tax when the water is sold to the oil and gas industry — and does it matter whether the customer takes it by tanker truck or through a pipeline?
It depends on how the water moves. Bulk water taken by tanker truck (in tanks) IS subject to Colorado sales or use tax, because water is corporeal tangible personal property and the Department's regul…
Is contract manufacturing (making goods from a customer's own raw materials) a non-taxable service, and does doing some of it cost a manufacturer the machinery exemption under § 39-26-709?
When a manufacturer makes goods entirely from the customer's own raw materials, there's no transfer of property, so it's a non-taxable service, not a sale. And the manufacturing-machinery exemption (§…
Are a camera maker's cloud-storage service plans subject to Colorado sales or use tax — both the software/server side and the cellular-data side?
Likely mixed. The cloud software and storage appear non-taxable because the company looks like an application service provider (ASP), whose hosted software Colorado does not tax. But the cellular-data…
If a Colorado contractor pays sales tax on construction materials and only later gets an exemption certificate, must the supplier go back and refund or credit that tax?
No. A supplier is not required to go back and refund or credit sales tax it correctly charged before a contractor presented an exemption certificate. The contractor must apply to the Department for a …
Can I subtract from my Colorado taxable income the dividends and capital gain distributions a mutual fund pays me from U.S. and Colorado government obligations?
Only true interest income qualifies—not dividends or capital gain distributions. Colorado lets you subtract interest from U.S. obligations and doesn't add back interest from Colorado state/local oblig…
Are walk-in bathtubs, in-home wheelchair lifts, and modular ramps exempt from Colorado sales tax as medical equipment?
It depends on the item — and all of them need a prescription. In-home wheelchair mobility lifts and modular ramps appear to qualify for Colorado's MOBILITY ENHANCING EQUIPMENT exemption, because they'…
Is the monthly rental of a prescription device that treats brain tumors with alternating electric fields subject to Colorado sales or use tax?
Exempt. The rental of this cancer-treatment therapy — a prescription device that delivers alternating electric fields through scalp electrodes to slow recurrent brain-tumor (GBM) cell division — is ex…
Is a 'consolidated freight charge' for moving goods between a seller's own facilities subject to Colorado sales tax, even if separately stated?
Probably taxable. A 'consolidated freight charge' — a fee for moving goods between the seller's own plants to combine a customer's order into one shipment — escapes sales tax only if BOTH conditions h…
Does Colorado's interstate-commerce exemption apply to lease payments on trucks, and how is the exemption documented?
It can apply to lease payments, but two conditions matter — and the second likely defeats it here. Colorado's interstate-commerce exemption (§ 39-26-712(1)(b)) reaches a LEASE only if the lease is tre…
Are the RFID tracking tags that marijuana growers are required to use exempt from Colorado sales and use tax as farm equipment?
They're taxable. The RFID tags Colorado requires growers to attach to track marijuana through the supply chain are subject to sales or use tax when purchased by cultivators. The grower's firm argued t…
When is propane a taxable 'special fuel' in Colorado, and how must propane dealers license, report, and pay tax on it?
Propane is a 'special fuel,' and any propane that is or may be used to propel a motor vehicle is taxable—so a dealer must be licensed (§ 39-27-104) unless it is certain none of its propane will go to …
Does Colorado sales tax apply to a separately stated prepaid-fuel charge or to freight/transportation charges on a vehicle?
It depends. A prepaid-gasoline charge is likely NOT taxable as long as it's optional and separately stated, because gasoline itself is exempt from state sales tax — but if the customer is required to …
Does a nonresident who buys Colorado tax lien certificates owe Colorado income tax on the interest the property owner pays to redeem them?
Yes. A nonresident is taxed on Colorado-source income, and interest on Colorado tax lien certificates qualifies under any of three independent provisions of § 39-22-109(2)(a): it's income from an owne…
Are colocation cross connects, cables, direct private lines, and remote-management software subject to Colorado sales or use tax?
It depends, and the Department gave only limited guidance because the company declined to request a (binding) private letter ruling. Whether colocation cross connects and cables are a taxable rental o…
Can a company use separate accounting instead of Colorado's single-sales-factor formula to apportion its income—and what does it have to prove?
The Department denied this request. Colorado (like most states) abandoned separate accounting long ago: it conflicts with the single-sales-factor method the legislature adopted in 2010, it's administr…
Does hemodialysis equipment qualify for Colorado's durable medical equipment or prosthetic device exemption?
Durable medical equipment — yes (apparently); prosthetic device — doubtful. Prescribed hemodialysis equipment appears to qualify for Colorado's durable medical equipment exemption: it withstands repea…
Is the sale of an infusion pump for at-home pain management subject to Colorado sales or use tax?
It's exempt — by either of two routes. An infusion pump that delivers medication is exempt from Colorado sales and use tax as a medical/disposable 'infusion' supply when dispensed pursuant to a prescr…
Does an out-of-state S corporation that does IT consulting remotely for a Colorado client have to file a Colorado income tax return?
Probably not on these facts. An S corporation's shareholders must file Colorado returns only if the company does business in Colorado—i.e., it has substantial nexus by exceeding any one threshold ($50…
Is a 'demand charge' on a commercial electricity bill subject to Colorado sales or use tax?
It's taxed the same as the electricity it's part of. A demand charge — the higher rate a utility charges for the ability to draw a large load (here ~74,600 watts) at peak times — is simply part of the…
Are an association's membership fees taxable when membership comes with both goods (a guidebook, a magazine) and services, and is tax refundable if a member cancels?
It depends on the true object. A membership fee can be a taxable sale when the member gets tangible goods (here, an instructor's guidebook, marketing material, and a magazine subscription) for the fee…
Are intrauterine devices (IUDs) subject to Colorado sales or use tax — hormonal versus copper?
Exempt, by two different routes. A hormone-releasing IUD is treated as a prescription drug, so it's exempt from Colorado sales and use tax when dispensed pursuant to a prescription by a licensed provi…
Do tanks for a natural-gas combined-cycle power plant qualify for Colorado's renewable-energy or manufacturing-machinery sales tax exemptions?
No renewable-energy exemption, and the manufacturing question was left open. Tanks for a natural-gas combined-cycle power plant don't qualify for Colorado's exemption for components that produce AC el…
Does Colorado charge excise tax (or sales tax) on propane and other liquefied petroleum gas sold for home heating and other non-vehicle uses?
No state fuel excise tax. Propane and other liquefied petroleum gas (LPG) used for home heating or other non-vehicle purposes is not 'special fuel,' so the special-fuel excise tax does not apply; a ve…
Is the federal excise tax on jet fuel included in the price Colorado sales tax is calculated on, or is it backed out?
It depends who the federal excise tax (FET) is levied on. Colorado sales tax is figured on the price charged, but a DIRECT federal tax — one levied on the purchaser — is backed out of the base, while …
Can an airline get a refund of Colorado sales tax on jet fuel it buys (and fuels up) in Colorado but burns on international flights?
No refund. Colorado sales tax applies to jet fuel sold and pumped into an aircraft's tanks in Colorado, even if the fuel is later burned on an international flight. Sales tax is a transactional tax fi…
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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.