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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When a modular-home manufacturer sells to a builder who installs the home for a homeowner, who collects the sales tax — and how is the 52% rule applied?
It depends on the builder's contract. Colorado taxes only 52% of a manufactured home's purchase price, and a later resale isn't taxed again. If the builder uses a LUMP-SUM contract it's the consumer a…
Is a custom promotional video a taxable sale of property or a non-taxable service, and what about charges for raw footage and project files?
Likely a non-taxable service. Under the 'true object' test, producing a custom promotional video is generally a non-taxable service even though some property (a DVD, thumb drive, or hard drive) change…
Are refrigerated bagged or packaged salads exempt from Colorado sales tax as food, or are they taxable 'prepared salads'?
It turns on whether dressing (and a utensil) is included. Colorado exempts food for home consumption but statutorily EXCLUDES 'prepared salads' from the definition of food. A bagged salad of lettuce a…
For Colorado income tax apportionment, is digital imagery delivered electronically tangible personal property, and how is it sourced?
It's tangible personal property, sourced to where it's delivered. For Colorado income tax apportionment, a static digital image delivered electronically is treated as a sale of tangible personal prope…
Is a third-party administrator that buys auto glass and bills insurers a marked-up price correctly collecting Colorado sales tax on the marked-up amount?
Yes — the method is correct. A third-party administrator of auto glass insurance claims that buys glass from local repair shops and bills the insurer a marked-up price is acting as a RESELLER, not a m…
Does an out-of-state S corporation owe Colorado tax when an employee works remotely from Colorado, even if that employee is a non-resident military spouse exempt from Colorado tax?
Yes. An out-of-state S corporation that performs services through an employee working in Colorado has Colorado-source income, because service income is apportioned to where the cost of performing the …
When an out-of-state company leases medical equipment to Colorado doctors, dentists, and vets, is sales tax collected up front at the start of the lease or on each rental payment?
When the tax is due depends on the type of lease. Colorado taxes leases of medical equipment — both 'true' leases and 'finance' leases — and the end-of-lease purchase price (nominal or fair-market) is…
Is a company that maintains a Material Safety Data Sheet (MSDS) database and prepares regulatory compliance reports, permits, and transport documents making taxable sales of tangible personal property, or providing nontaxable services?
The Department couldn't decide. A digital Material Safety Data Sheet (MSDS) is tangible personal property — like a digital reference manual — and is taxable if the customer is really just buying acces…
Are a medical-records company's retrieval and copying fees taxable in Colorado, and must the company collect tax?
Not taxable, and the company doesn't have to collect tax. The Department ruled that a company's charges for retrieving and copying medical records aren't subject to Colorado sales tax no matter how de…
Does an out-of-state wholesaler lose Public Law 86-272 protection in Colorado when its in-state employee supervises a sales team, oversees major-account contracts, and develops sales strategy?
It depends — possibly. Public Law 86-272 still protects an out-of-state seller of tangible personal property even if its in-state employee does things closely related to soliciting orders, but protect…
After Colorado reinstated the exemption for electronically delivered software on July 1, 2012, are digital e-books, music, and movies also exempt, and how is tax applied to ASPs and software accessed over the internet?
It depends on what's delivered. Effective July 1, 2012, Colorado exempts electronically delivered computer SOFTWARE from sales and use tax — but digital BOOKS, MUSIC, and MOVIES remain taxable tangibl…
When a company installs fire sprinkler/alarm systems into buildings through subcontractors and bills clients time-and-material, who owes Colorado sales tax?
The company's time-and-material charges to clients are taxable; its payments to subcontractors are not. A company that installs, repairs, and inspects fire sprinkler and alarm systems built into build…
Are a sign company's entry towers installed at car dealerships taxed as real-property fixtures, and does lump-sum vs. time-and-material billing change who pays?
If the entry towers are FIXTURES — tangible personal property so affixed to a building that it can't be removed without substantial damage (Reg 39-26-102.15) — then Colorado's CONTRACTOR rules govern,…
Is the electronic renewal of a software license taxable when the original prewritten software was delivered on a CD but the renewal involves no new tangible delivery?
Yes — the renewal is taxable. For software sold on or after July 1, 2012, Colorado taxes prewritten 'canned' software only if it's (1) pre-packaged for repeated sale/license, (2) governed by a tear-op…
Is domestic (non-bonded) jet fuel sold to a commercial airline for international flights exempt from Colorado tax the way fully tax-exempt bonded jet fuel is?
The Department wouldn't decide. Domestic (non-bonded) jet fuel used only for international flights might qualify for Colorado's fuel excise tax exemption, but only if the federal government exempts no…
Are the various per-record fees a medical-records company charges (copying, retrieval, certification, postage, etc.) subject to Colorado sales tax?
None of them are taxable. The Department ruled that every enumerated fee a medical-records release-of-information company charges — basic, retrieval, certification, photo/per-page, handling, postage, …
Which of these are taxable in Colorado: garden seeds and plants, glucose tablets, rehydration products, glucose/urinalysis test strips, pregnancy and ovulation test kits, and a coupon book?
A mixed bag, item by item. (1) Garden/vegetable/fruit seeds, flower seeds, fruit trees, and vegetable plants are EXEMPT only if used in a COMMERCIAL AGRICULTURAL operation (§ 39-26-716(4)(b)); bought …
Which fees on a utility bill — connection, reconnection, disconnection, late payment, returned check — are subject to Colorado sales tax?
For a TAXABLE (commercial) gas or electric account, the fees split by whether they're part of getting the service. Connection, reconnection, and disconnection fees are generally TAXABLE — they're inse…
Was a monthly server-support/maintenance fee covering free Microsoft patches and upgrades taxable under Colorado's 2010–2012 software rules?
Probably not taxable — though the Department gave only general guidance. The question covered the window from March 1, 2010 to June 30, 2012, when 'standardized' (prewritten) software was taxable no m…
For an equipment lease, are the purchase option, insurance premiums, documentation fees, late-payment fees, and reimbursed personal property taxes subject to Colorado sales/use tax?
Mixed, and this amended (2013) letter REVERSED the original 2008 conclusion on late fees. Leases of tangible personal property are taxable (and the purchase-option price—fair-market or nominal—is taxa…
Does a charity have to charge sales tax on dinner tickets at its annual fundraiser, and how do donations and the $25,000 limit factor in?
A charity's fundraiser sales are exempt as an 'occasional sale' only if it stays under BOTH limits — no more than 12 days of sales in the year AND no more than $25,000 in NET proceeds used for a chari…
Are sutures and IV catheters used in a hospital procedure exempt from Colorado sales tax, and does it matter whether they leave with the patient?
It depends on whether the item leaves with the patient. Colorado exempts nonprescription drugs or materials furnished by a licensed provider as part of professional services to a patient (§ 39-26-717(…
Is a plumber doing sewer inspection, clean-out, and thawing a taxable contractor, does itemizing equipment make it a taxable rental, and when are local taxes due?
Mostly not — but only general guidance was given. (1) A plumber is a 'contractor' (with lump-sum vs. time-and-material tax rules, SR-10) only when incorporating tangible personal property INTO real pr…
If an event company rents equipment from a lessor and hires its own contractors to operate it, can it buy the rental tax-free for resale — or does it owe tax as the user?
It turns on who operates the equipment. A production-event company rents stage/sound/lighting gear from a lessor and either hires its own third-party contractors to run it or lets the client's employe…
Does an out-of-state C corporation that only solicits sales orders for manufacturers — a service — have to file a Colorado corporate income tax return if it has a Colorado employee?
Likely yes, if it has Colorado nexus. An out-of-state C corporation must file a Colorado corporate income tax return if it has substantial nexus — property over $50,000, payroll over $50,000, sales ov…
Are a supplier's implementation, web-hosting, management, and payment-processing fees for on-site vending machines taxable as part of the product sales?
Likely taxable — the Department's general view is that these 'service' fees are inseparable from the taxable product sales and ride into the tax base. A supplier of fasteners and industrial goods put …
In a Colorado drop-shipment, can the seller accept an out-of-state resale or exemption certificate, whose certificate counts, and what form is used?
Yes — Colorado accepts out-of-state documentation in drop shipments, with conditions. A wholesaler may accept a buyer's sales tax license issued by another state to document a resale exemption (using …
Are tear/serum osmolarity testing modules exempt from Colorado sales tax as 'blood and urine testing kits and materials'?
No — they're taxable. Colorado exempts the sale of 'blood and urine' testing kits and materials (§ 39-26-717(d)), but the Department concluded that tear/serum osmolarity testing modules (such as TearL…
Can a Colorado special district levy its sales tax on natural gas and electricity that a business buys for industrial/manufacturing use?
No. Natural gas and electricity bought for manufacturing and other industrial processes are exempt from Colorado state sales and use tax (§ 39-26-102(21)), and the Department's special districts follo…
Are charges for renting equipment, for the on-site labor of an operator who runs it, and for chemicals used with it subject to Colorado sales or use tax?
It depends on how the deal is structured — and the Department could only give general guidance, not a determination. Colorado taxes the rental of tangible personal property (like motors and tooling), …
If a Colorado customer pays sales tax and later provides an exemption certificate, how and when can the seller refund the tax — and can the customer force the seller to do it?
Yes, with limits. A seller that collected Colorado sales tax because the buyer didn't show an exemption certificate at the time of sale may later refund the tax once the buyer provides a valid certifi…
Can a financial institution use an alternative, deposits-based apportionment instead of the financial-institution rule that sources investment income to where decisions are made?
Yes. The financial-institution special regulation (Special Regulation 7A) sources receipts from investment and trading assets to the location of the day-to-day decisions—a cost-of-performance approach…
Can a Colorado retailer sell items at an even, tax-included price instead of adding sales tax separately at the register?
Generally no — not silently. Colorado law makes it unlawful for a retailer to advertise or hold out that it will absorb the sales tax or won't add it to the selling price, and the regulation requires …
Can the members of a Colorado LLC claim the Colorado source capital gain subtraction on the gain from selling all the LLC's business assets, mostly goodwill?
No. The members cannot use the Colorado source capital gain subtraction (§ 39-22-518) for gain on the sale of all of the LLC's business assets. The subtraction covers gain on (A) real or tangible pers…
Is a subscription fee for an online financial newspaper, and for interactive online stock screens and performance ratings, subject to Colorado sales or use tax?
Neither is taxable. The subscription fee for an online version of a daily financial newspaper is NOT subject to Colorado sales or use tax: Colorado excludes qualifying daily 'newspapers' from taxable …
Are Braille devices, electronic magnifiers, adapted phones, and other products that help blind and legally blind people exempt from Colorado sales and use tax?
Probably not exempt, though the Department made no determination. Three Colorado exemptions might seem to apply — optical sales, prosthetic devices, and durable medical equipment — but the optical exe…
Does a full-service truck wash owe Colorado sales tax on the wash, and use tax on the soaps, wax, water, electricity, gas, and equipment it uses?
Likely a non-taxable service — but with use tax on the supplies. A full-service wash where the company's own employees run the equipment is treated as a non-taxable service, not a taxable equipment re…
When a company buys parts out of state, has them assembled in Colorado into a finished unit, and then exports that unit out of the country, must it pay Colorado tax on the parts, or are they exempt wholesale purchases?
The parts are likely exempt as components of a manufactured product, though the Department made no determination. Colorado exempts tangible personal property bought by a manufacturer that becomes an I…
Does an out-of-state company that occasionally sends tutors to teach a corporate training course in Colorado owe Colorado sales tax or income tax?
Generally no sales tax on the teaching itself, but watch the materials and income tax. Colorado treats education and training as nontaxable services, so charges for instruction aren't subject to sales…
Does Colorado sales or use tax apply when a company leases a passenger car for more than 24 months to someone who lives outside Colorado?
Generally no. If the lessee is a Colorado nonresident when the lease is signed and immediately takes the car to another state to register and use it, the lease is exempt from Colorado sales and use ta…
When a company rents out equipment and also bills customers for reimbursable expenses like lodging, airfare, and car rentals for its on-site staff, are those reimbursed expenses subject to Colorado sales tax?
It depends on separability and the true object — the Department made no determination. When a company both rents taxable equipment (two-way radios) and provides non-taxable services (sending staff to …
Is a prescribed cold-therapy band/cuff that wraps around the body and is connected to a cooling device exempt from Colorado sales tax as durable medical equipment?
Maybe, but the Department wouldn't decide. A prescribed cold-therapy band — wrapped around an injured area and connected to a separate cooling device, used in orthopedic-surgery recovery — could be ex…
Are welding gases (acetylene, oxygen, argon, CO2) and welding equipment, attachments, and tools exempt from Colorado sales tax when sold to a manufacturer whose welding is part of its manufacturing process?
Mostly taxable, with one exemption. ACETYLENE used in a manufacturing or cutting process is EXEMPT from Colorado state sales tax as an industrial fuel ('gas') because it is an energy source — though s…
Are separately stated transportation/delivery charges subject to Colorado sales tax, including in a drop-shipment where goods ship directly from the manufacturer to the customer?
It depends on separability. Transportation of goods between a retailer and a buyer is presumptively a NON-TAXABLE service, but a delivery charge is excluded from sales tax only if it is BOTH (1) separ…
Is the product delivered by an Application Service Provider (ASP) — such as an electronic sales-tax-rate lookup accessed over the internet — subject to Colorado sales and use tax?
Generally not taxable software, but the Department didn't decide this specific product. Colorado taxes tangible personal property, and effective July 1, 2012, computer software is taxable only if it i…
When a steel fabricator does internal fabrication work, or buys fabrication services from a third party, are those labor costs subject to Colorado sales and use tax?
It depends on who fabricates, who supplies the materials, and what happens to the goods. Colorado taxes the FULL purchase price of articles made to order, INCLUDING the fabrication labor, even if labo…
Is a custom 'bio-engineered' orthotic shoe insert exempt from Colorado sales and use tax as a prosthetic device or durable medical equipment?
The Department wouldn't decide, and it signaled skepticism. A custom 'bio-engineered' orthotic shoe insert might be exempt as a prosthetic device — an artificial device that aids or replaces a bodily …
Is a pharmacy's charge for a pharmacist's comprehensive review of a patient's medication records subject to Colorado sales tax, even though the patient may receive a printed report or medication chart?
Likely not taxable. A pharmacist's comprehensive medication-record review and face-to-face consultation looks like a non-taxable professional SERVICE — like advice from a doctor or accountant — even i…
Can a manufacturer claim a Colorado sales/use tax exemption on coal and shredded tires that serve as both kiln fuel and as a chemical ingredient in the finished product?
Partly exempt. A manufacturer may exempt the portion of its coal and shredded-tire purchases that becomes a component of its product — silica and alumina from coal ash, and iron from the tires' steel …
Are the components of a leased residential rooftop solar photovoltaic system exempt from Colorado sales and use tax under the renewable-energy components exemption?
Mostly exempt. The components of a leased residential solar photovoltaic system — modules, racks, inverter, wiring — are exempt from Colorado state and state-administered local sales and use tax under…
Are complete-nutrition and specialized nutritional shakes exempt from Colorado sales tax as 'food,' or taxable as dietary supplements?
They're exempt food. Four nutritional shakes — a complete-nutrition shake, a specialized-nutrition shake, a diabetic shake, and a post-workout shake — all qualify as exempt 'food' because each carries…
Is a web-based subscription service for sending, receiving, and tracking large digital files subject to Colorado sales or use tax, or is it a non-taxable service?
It's a non-taxable service. A web-based subscription for sending, receiving, and tracking large digital files is a service — not a rental of software or servers — so it is not subject to Colorado sale…
When a vehicle lease has an end-of-lease 'true-up' payment between the leasing company and the customer, how is Colorado state and local sales/use tax adjusted, refunded, or collected?
Treat the true-up as an adjustment to the earlier lease payments. Because the lease agreement says the payments are only estimates to be finalized when the vehicle is sold at lease-end, the true-up re…
As an out-of-state lessor of equipment used in Colorado, do I collect from lessees both the sales tax I paid when I bought the property and use tax on their lease payments?
No — you choose one method, not both. For a true lease of 36 months or less, the default is the lessor pays sales/use tax up front when it buys the property and does NOT collect tax from lessees (it c…
Does Colorado sales or use tax apply to an advertising agency's separately stated charges for direct-mail materials and mailing fulfillment when the materials are printed in Colorado but mailed to recipients outside the state?
No. An advertising agency's separately stated charge for direct-mail advertising materials — printed in Colorado but mailed to the client's potential customers located outside Colorado — is not subjec…
Is a prescribed, at-home ophthalmic monitoring device — and the monitoring, data-processing, and call-center services that go with it — subject to Colorado sales tax?
No on both. A prescribed ophthalmic device a patient uses at home to monitor for eye disease appears to qualify as exempt durable medical equipment (it withstands repeated use, serves a medical purpos…
Is liquor-filled candy exempt from Colorado sales tax as food, or is it taxable?
It's taxable. Liquor-filled candy does not qualify as 'food' under the federal SNAP and WIC definitions that Colorado uses for its food exemption, so it's subject to Colorado state sales and use tax (…
When a customer uses a coupon, does Colorado sales tax apply to the price before or after the coupon — and does it matter whether it's a manufacturer's or a store coupon?
It depends on who funds the coupon. A manufacturer's coupon doesn't reduce the Colorado sales tax base — because the manufacturer reimburses the retailer for that part of the price, tax is calculated …
When must a Colorado auctioneer collect sales tax on items it sells (including motor vehicles), and when is the owner responsible instead?
The auctioneer usually must collect. A Colorado auctioneer selling goods on an owner's behalf is treated as the retailer and must collect and remit sales tax — unless one of two exceptions applies: (1…
Is an auctioneer's separately stated administrative fee (buyer's premium) subject to Colorado sales tax, or is it a non-taxable service charge?
It's taxable. An auctioneer's administrative fee or buyer's premium — even when stated separately on the invoice — is included in the Colorado sales tax base, because the fee is generally not optional…
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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.