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 Voice over Internet Protocol (VoIP) phone service subject to Colorado sales tax?
Yes. Colorado taxes intrastate telephone/telecommunications services, and the Department treats VoIP as functionally the same as traditional telephone service—so charges for VoIP are subject to…
Does an out-of-state insurer with a Colorado insurance license — but no Colorado employees — have Colorado income-tax nexus?
Possibly. The Department wouldn't decide nexus in a General Information Letter, but it observed that merely registering with the secretary of state does not create income-tax nexus, while holding a…
Does a retailer owe Colorado use tax when it withdraws items from inventory to assemble and display them before selling, and can it credit that use tax against the tax collected on the later sale?
Usually no use tax on ordinary displays. A retailer that pulls goods from inventory and puts them on display WHILE still holding them out for sale has made only an 'incidental' use and owes no use…
Are a seller's charges for installation, troubleshooting, removal, reinstallation, and trip fees on equipment subject to Colorado sales tax?
It depends on how the labor is sold. Charges for services are generally not subject to Colorado sales tax, but a charge for maintenance or a service warranty made in connection with the sale or…
When a bank buys equipment-lease contracts from an affiliate that services them, who registers and files Colorado sales tax — the bank or the servicing affiliate?
The Department says a taxpayer remains responsible for registration, filing, and remittance even when it uses an agent for invoicing and collections. The GIL does not determine whether the bank or…
Are PDF documents that customers pay for and download from the internet subject to Colorado sales or use tax?
Yes. Colorado defines taxable tangible personal property as 'corporeal' property, and the Department treats electronic data as corporeal—so the sale of documents (such as PDFs) downloaded from the…
Does a company that sells and installs a factory-built (modular) home in Colorado owe sales tax, and is any part of the price exempt?
Yes, but only on part of the price. A modular or other factory-built home is taxable tangible personal property, and the seller must collect Colorado sales tax from the buyer—but 48% of the purchase…
If my business has Colorado nexus but no sales tax to report for a period, do I still have to register and file a Colorado sales tax return?
Yes. Once a retailer is required to hold a Colorado sales tax license, it must file a sales tax return for every reporting period—even one with no tax due—using the Department's free 'zero file'…
Are custom single-use surgical instruments a manufacturer sells to hospitals and surgery centers subject to Colorado sales or use tax?
The Department gives general medical-supply guidance but does not determine the taxability of the company’s custom instruments. It explains that material supplied by a doctor generally must leave…
Is short-term lodging furnished to an out-of-state church youth group on a ski trip exempt from Colorado sales tax as a sale to a charitable organization?
Taxable. Short-term lodging (under 30 days) furnished to an out-of-state church youth group on a ski trip is subject to Colorado sales tax. Colorado taxes room accommodations rented for fewer than…
When a motor-vehicle lessor sells the leased vehicle to the lessee at the end of the lease, who is responsible for collecting Colorado sales or use tax?
The lessor collects the tax. When a motor-vehicle lessor sells the leased vehicle to the lessee at the end of the lease (here, at fair market value), that's a taxable sale and the Company, as…
Are pet microchips, scanners, and ID tags taxable, and how are bundled pet-recovery services and 'free' chips treated under Colorado sales tax?
Goods taxable, services not. Pet microchips, scanners, and ID collar tags are tangible personal property, so their sale is subject to Colorado sales/use tax; no exemption applies (the livestock-drug…
Is Colorado sales or use tax due when a lessee pays $1 to take title at the end of a Lease Intended as Security (LIS) agreement?
The Department does not decide whether the $1 payment at the end of this Lease Intended as Security is taxable. It describes a taxable nominal purchase in a finance-lease installment-sale framework…
How does a prepaid debit card company apportion its Colorado income from card sales and transaction fees — by cost of performance or by market?
By market, not cost of performance. The Department ruled that a prepaid/debit card company qualifies as a 'financial institution' because it earns more than 50% of its income from activities a…
Are a company's print-and-mail service and its electronic data services (file transfer, address correction, database search) subject to Colorado sales tax?
The Department says the described electronic programs appear to be services not subject to sales or use tax, but it does not decide that issue. For the print-and-mail service, tax depends on whether…
How is Colorado sales and use tax applied when related companies sell building materials to one another, and a contractor installs them into real property?
A contractor is the consumer of building materials it incorporates into real property and pays sales tax when it buys them; the building owner pays no sales or use tax on those materials. A…
Are a web-hosted exemption-certificate portal and an online sales/use tax-return preparation service subject to Colorado sales or use tax?
Not taxable. Two web-hosted products—an online portal where customers fill out, print, and submit sales-tax exemption certificates, and a service that prepares and files a client's sales/use tax…
Will an out-of-state company owe Colorado corporate income tax if it lets one overhead employee work from a home office in Colorado, even though he generates no revenue?
The Department gives general rules about Colorado income-tax nexus and service-income sourcing but does not determine whether the requesting company’s proposed employee would create tax liability.…
Are retail sales of enteral feeding pumps subject to Colorado sales tax?
Taxable. Retail sales of enteral feeding pumps are subject to Colorado sales tax. Colorado taxes retail sales of tangible personal property, and while several medical-equipment exemptions exist, the…
Is a separately stated fee to read the meter on a customer's propane tank subject to Colorado sales tax?
It depends on the customer, and the Department made no binding determination on separability. A fee to read the meter on a propane tank is NOT taxable when the gas sale itself is exempt—Colorado…
Are an FCC-license fee and a 'coordination fee' that a two-way-radio distributor charges its customers subject to Colorado sales or use tax?
It depends, and the Department made no binding determination. FCC-license and 'coordination' fees a distributor bills along with two-way radios are TAXABLE if either (1) the radio service qualifies…
Can a corporation or LLC claim Colorado's nonresident temporary-use exemption on an aircraft or vehicle used briefly in Colorado, and can a Colorado resident avoid use tax on an out-of-state vehicle driven into the state?
The nonresident temporary-use exemption (§ 39-26-713(2)(c)) applies only to individuals, not to corporations or LLCs — so an out-of-state corporation's aircraft used in Colorado owes Colorado use…
A condo developer paid sales tax when it bought furniture, then sells the furnishings to fractional-interest buyers with the units—does it owe sales tax again on that sale, and is that double taxation?
Yes, the sale to fractional-interest buyers is a taxable retail sale of tangible personal property—even though the developer already paid sales tax when it bought the furniture. The developer is…
When a contractor incorporates its own materials into Colorado real property, is the fee paid to a third-party fabricator excluded from the use tax on those materials?
It depends on whether the fabricator also sold the materials. A contractor that buys materials out of state and incorporates them into Colorado real property is the consumer and owes use tax on its…
When a company sells taxable equipment below its cost to get customers to sign up for a non-taxable service, is sales tax based on the low price the customer pays or on the company's cost?
On the company's cost, not the low price the customer pays. When a company sells taxable equipment below its acquisition cost as an inducement to buy a non-taxable service, Colorado sales tax is…
Are specialty therapy mattresses (low-air-loss, pressure-relieving, turning, bariatric), HI/LOW and bariatric bed frames, and wheelchairs subject to Colorado sales tax?
It depends on the item. Colorado taxes tangible personal property, but the medical exemption specifically covers wheelchairs and hospital beds. Therapeutic devices, appliances, and related…
Are medical diagnostic test kits—a flu A+B test, an RSV test, and an hCG urine test—subject to Colorado sales or use tax?
The Department gave the framework, not a firm answer. Colorado taxes tangible personal property unless exempt (§39-26-104), and several medical exemptions can apply to diagnostic…
Is an insurance company exempt from Colorado corporate income tax because it is 'subject to' the gross premium tax, even though all of its premiums are exempt from that tax?
The Department held that this Medicare Part D insurer was exempt from Colorado corporate income tax on its represented facts. The result depends on its Colorado insurance license, statutory status,…
When a company gives a 'free' satellite-TV receiver as an inducement to subscribe to non-taxable TV service, who owes tax on the equipment — and can the company collect it from the customer?
The company owes use tax. When a provider gives a 'free' or credited satellite receiver as an inducement to sign up for non-taxable TV service, it's using its own inventory for marketing — so it…
Do nonresident directors of a nonresident corporation owe Colorado income tax on their director pay because they held one board meeting in Colorado?
Yes, on a day-apportioned share. Nonresident directors who attend a board meeting in Colorado are carrying on their occupation in Colorado, so that income is Colorado-source. The Colorado portion is…
How does Colorado tax commercial signs and the related charges—installation, removal, crating, freight, city permits, electrical hookup, and subcontracted repairs—on a customer's invoice?
Signs are generally taxable tangible personal property—most commercial signage does NOT lose its identity to become an integral, inseparable part of realty just by being bolted down (Reg…
Are orthopedic implants (screws and plates made in standard sizes, not fitted to one person) exempt from Colorado sales tax, even if they don't meet the 'prosthetic device' definition?
They may well be exempt, but through a different door than the company assumed. Rather than fighting over whether standard-size screws and plates are 'prosthetic devices' (which FYI Sales 68 defines…
When a printer in one Colorado city prints marketing material and either ships it to a direct-mail company or mails it to recipients, whose local sales tax applies?
It depends on where the printed material is delivered, and many of the relevant taxes are home-rule taxes the Department doesn't administer. For the state-administered county taxes, a retailer that…
In Colorado, are food supplements (vitamins, minerals), therapeutic medicines, and toiletries like soap and deodorant exempt from sales tax as 'food'?
Most of them are taxable. Colorado exempts 'food' (tied to the federal food stamp definition, 7 U.S.C. §2012(g)), but food supplements and deficiency correctors—vitamins, minerals, cod liver oil,…
Are the fees a company charges dentists for a turnkey patient-rewards program (including the mailers it sends to patients) subject to Colorado sales or use tax?
The Department gave the framework rather than a firm answer. Colorado taxes tangible personal property and only a limited number of services; when the TRUE OBJECT of a transaction is a service, it…
When a customer applies a $40 federal NTIA coupon toward a TV converter box, does Colorado sales tax apply to the full price or the reduced price the customer pays?
Tax applies to the full price. Under the federal NTIA program a household gets coupons worth up to $40 each toward a TV converter box, so a $59.99 box costs the customer $19.99—but Colorado sales…
In Colorado, are dietary supplements, TENS units, and 'pads' subject to sales tax, or do they qualify as exempt food or exempt therapeutic devices?
Supplements are generally taxable—dietary supplements like vitamins and minerals are tangible personal property and don't qualify as exempt food (Regulation (39)-26-102.4.5(b)(8)/(9)) or, generally,…
In Colorado, are restocking fees, passed-through vendor travel/expense charges, on-site training, and equipment rentals subject to sales or use tax?
Four answers. (1) Restocking fees: if a retailer charges one, it gets NO sales-tax refund on the return, because §39-26-102(5) allows the credit only when the FULL purchase price is refunded—a…
Are optional, separately stated clothing alterations (hemming, shortening, taking in) ordered at the time you buy the garment subject to Colorado sales tax?
No. Optional, separately stated alteration services—shortening, hemming, taking in—that a customer orders from the retailer at the time of buying the clothing are NOT subject to Colorado sales or…
When a customer uses a $40 federal government coupon toward a converter box, is Colorado sales tax computed on the full price or on the reduced price the customer actually pays?
Tax is computed on the full price, not the discounted price. A $40 federal coupon used toward a $49.99 converter box means the customer pays $9.99, but Colorado sales tax still applies to the full…
Are updates to 'canned' software and the support services in an optional maintenance contract taxable in Colorado, when sales tax was already paid on the original software license?
It depends on whether an update merely repairs the existing software or is a new upgrade, and whether the maintenance contract is optional. Bug-fix updates that repair, correct, or maintain the…
When a customer returns goods in a later quarter and the retailer refunds the price plus the sales tax, how does the retailer recover that overpaid sales tax on its Colorado return?
Report the refunded gross sales on Line 3C ('Overpayment from previous return') of the Colorado sales tax return (Form DR 0100). Subtract it from net sales on Line 3 to get taxable sales on Line…
When a direct-sales company gives a party hostess 'hostess dollars' to apply against her purchases, and charges separately stated shipping, are those amounts included in the price on which Colorado sales tax is computed?
Yes to both. 'Hostess dollars' are credits, not discounts—the hostess earns them in a quid pro quo exchange for opening her home and generating sales—so Colorado sales tax is computed on the full…
Does a distance-learning company have to charge Colorado sales tax on the printed course materials (binders) it ships to students, or is it a nontaxable service?
They're taxable. The Department concluded that this distance-learning program is more like a home-study course than a traditional school: the true object of the transaction is the printed materials…
When a contractor builds a telecommunications tower attached to a carrier's property, who owes sales/use tax on the materials—and does it change with a lump-sum vs. time-and-material contract?
It depends on whether the tower becomes part of the real property and on the contract type. The general rule: a contractor is the CONSUMER of building materials that lose their identity by becoming…
Does a company owe sales tax when it has customers' VHS tapes converted to DVD by a third party and hands over the DVD for a fee—and can it buy the conversion from the third party tax-free?
Yes, the sale to the customer is taxable, and the company should buy the conversion tax-free for resale. There are two sales: the third party's sale of the finished DVD to the company is an exempt…
Does a for-profit daycare pay sales tax on the paper plates, plasticware, and similar supplies it uses to serve food to children?
The daycare pays the tax. A for-profit daycare is a service enterprise and is treated as the consumer of the tangible personal property it uses to run its business—paper plates, plasticware,…
Does Colorado sales tax apply to a company that only provides labor—merchandising, hanging signage, and assembling fixtures—for retail-store customers who own all the goods?
No. A company that provides only labor—stocking and arranging merchandise, hanging the store's signs, and assembling the store's display fixtures—is performing nontaxable services and owes no…
Are motorized scooters and orthopedic items like a walker boot, post-op soft shoe, and suspension boot exempt from Colorado sales tax?
No—all are taxable. Motorized scooters don't qualify for the wheelchair exemption: exemptions are narrowly construed, and these aren't commonly understood to be wheelchairs (even the makers don't…
Are visco-elastic (memory-foam) mattresses, pillows, and cushions exempt from Colorado sales tax as therapeutic devices if a doctor prescribes them for pain management?
No, not on the facts shown. Visco-elastic memory-foam mattresses, pillows, and cushions don't qualify for Colorado's therapeutic-device exemption even with a doctor's prescription. Tax exemptions…
Can an automotive-parts wholesaler accept a dealership's resale certificate—especially if it separately invoices the parts department—when some items will be consumed by the dealer and some resold?
Yes, with due diligence. A wholesaler can generally accept a Colorado retailer's sales tax license number as good proof of a wholesale (exempt) sale, and the retailer must make a good-faith estimate…
Is a surgical laser used to create LASIK flaps, and its single-use interface (a milled glass part, like the blade in the traditional method), exempt from Colorado sales or use tax?
They're taxable. Colorado exempts drugs or materials a doctor furnishes to a patient (plus corrective eyeglasses, contacts, and hearing aids), but the rule turns on whether the item leaves with the…
Are software-as-a-service (SaaS) hosting fees and network-connectivity fees subject to Colorado sales or use tax?
Apparently not. On the limited facts, the Department found that neither a SaaS hosting fee (the right to use hosted software, with no ownership transferred) nor a separately billed…
Does Colorado sales or use tax apply to custom software, standalone services, installation, repairs, freight, and training sold with telecommunications equipment?
Mostly no, with one big 'it depends.' Custom software, standalone services, repair labor, and training are generally not subject to Colorado sales tax. Freight/transportation is generally not…
If a multi-level marketing company sells through independent distributors in Colorado, is sales tax figured on the suggested retail price or on what the customer actually paid, and who is liable if a distributor fails to collect it?
Sales tax is figured on the money actually received in cash and credits, not the suggested retail price. Colorado lets the company treat its independent distributors as its agents, so the company is…
Will Colorado accept an electronically captured exemption/resale certificate with an electronic signature as adequate audit documentation, and what due diligence must the cashier still do?
Yes, with safeguards. Colorado will accept an electronically captured exemption or resale certificate with an electronic signature as adequate audit documentation, but the cashier must still: view…
Is market/consumer research delivered on paper or CD a taxable product or a nontaxable service in Colorado?
It depends on custom vs. repetitive. Under the 'true object' test, market or consumer research created for a single specific client is a nontaxable service, with the paper or CD treated as…
Are external fixators and single-use surgical wire exempt from Colorado tax as therapeutic devices?
External fixators are exempt; the surgical wire is taxable. Colorado exempts therapeutic devices, equipment, and accessories that correct or treat a human physical disability. An adjustable external…
Is gas, electricity, and water used in manufacturing exempt in Colorado — and how do R&D, packaging, residential use, nursing homes, and restaurants fit?
Electricity and gas (and steam, coal, fuel oil, coke, nuclear fuel, wood) used in manufacturing and industrial processes are exempt from state, special-district, and state-administered local…
Is carbon dioxide sold to a retailer to carbonate fountain drinks taxable, and is the rental of the tank system that ships and stores it taxable?
The carbon dioxide is exempt — it becomes an ingredient of the soft drink, so the supplier's sale to a retailer is an exempt sale for resale. The shipping tank is also exempt as the container for an…
Browse Colorado rulings by topic
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.