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 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,…
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…
Are the electronic messaging and notification email services described in Colorado PLR-15-003 subject to sales or use tax?
No. The Department found the described messaging services outside taxable telephone and telegraph service. Even if notification email were a taxable telegraph service, it concluded that the federal…
Must a Colorado affiliated group combine financial and nonfinancial corporations, and how could it apportion income for 2014 and earlier?
All qualifying financial and nonfinancial members had to join the combined return. For 2014 and earlier, the group could use the separate-subgroup apportionment method described in PLR-11-002; a…
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…
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?
The Department discusses possible nontaxable ASP treatment for cloud software and conditional tax treatment for cellular data plans. It does not decide the company’s ASP or reseller status. De…
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…
How did Colorado tax an integrated contractor’s mined gravel, asphalt, and production machinery?
Internal transfers between divisions were not sales; self-mined gravel had a zero acquisition-cost base. A lump-sum contractor owed use tax on purchased asphalt ingredients it consumed. Asphalt…
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…
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…
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…
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…
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…
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…
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…
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…
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…
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…
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…
Are separately stated delivery and pickup fees for rented construction equipment taxable in Colorado?
No, on the stated facts. Customers could realistically use another transportation service, and delivery and pickup were separately stated on the invoice. The Department treated those optional…
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…
Is the sale of an infusion pump for at-home pain management subject to Colorado sales or use tax?
The Department says two exemptions appear relevant to the described infusion pump but does not make a specific determination. The prescription route and the provider-furnished route each have…
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…
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…
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…
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…
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…
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…
Were Colorado sales of the described bone-regeneration product to hospitals and surgery centers taxable?
No. The amended ruling treated the single-use product as exempt material furnished to a patient in a licensed provider’s professional service, including when a hospital or surgery center bought it…
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,…
When were the facility’s recovery braces and implant-kit pins or drill bits exempt from Colorado sales or use tax?
Products furnished to a patient as part of a licensed provider’s professional service could be exempt; a separate sale unrelated to that care did not qualify on that basis. Implant pins were exempt,…
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…
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…
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)…
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…
For Colorado income tax apportionment, is digital imagery delivered electronically tangible personal property, and how is it sourced?
For the addressed company, electronically delivered static digital images are tangible personal property for Colorado income-tax apportionment. Delivery into Colorado sources the sale to Colorado;…
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…
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…
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 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…
Does a cloud call-control provider sell software, or taxable telecommunications service, to Colorado clients?
The provider consumed its own hardware and software and did not sell or lease them to clients. Its cloud call-control service was nevertheless taxable as intrastate telecommunications service when…
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…
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…
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…
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…
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…
When were software licenses and maintenance agreements taxable under this Colorado ruling?
On the stated post-June 2012 facts, repeated-sale software delivered on a tangible medium was taxable when its license was nonnegotiable, including an online click agreement. Negotiable licenses and…
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…
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…
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,…
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?
The Department discusses possible tax rules for the listed products but makes no specific determination. It identifies blood- and urine-testing items in FYI Sales 68, discusses prescription…
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…
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…
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…
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…
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 (§…
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…
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…
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…
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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.