Recent Developments in Colorado Sales and Use Taxes
| Publication year | 1989 |
| Pages | 2101 |
1989, November, Pg. 2101. Recent Developments in Colorado Sales and Use Taxes
The Colorado sales tax is levied on the retail sale of tangible personal property within the state.(fn1) Certain telephone, telegraph, gas and electric utility services, prepared food served by eating establishments and rentals of hotel rooms and similar accommodations are also subject to the sales tax.(fn2) There are numerous exemptions from the sales tax based on the nature of the transaction in question or its subject matter.(fn3)
The Colorado use tax serves as a complement to the sales tax. It generally applies to the storage, use or consumption, within Colorado, of tangible personal property where such property was purchased at retail in another state, was purchased for resale or was otherwise not subject to Colorado sales tax when purchased.(fn4) If the owner of the property was subject to Colorado sales tax on its purchase, the use tax does not apply.(fn5) If the owner paid sales or use tax to another state on the purchase or use of the property, the Colorado use tax otherwise imposed is reduced (not below zero) by the amount of tax paid to the other state.(fn6) The exemptions from the use tax follow the exemptions from the sales tax, with limited exceptions.(fn7)
This article reviews significant judicial, legislative, and administrative changes to the Colorado sales and use tax since 1986. In addition, it is intended as a supplement to the summaries in the 1988 Annual Survey of Colorado Law.(fn8)
In a 1986 case, State Dept. of Revenue v. Adolph Coors Co.,(fn9) the Colorado Supreme Court held that beer kegs are "containers" exempt from the Colorado sales/use tax imposed on their contents. Therefore, the purchase of materials used in the manufacture of such kegs is exempt from sales/use tax under CRS §§ 39-26-102(20)(a) and 39-26-203(1)(f)(I).
In a 1988 case, Raynor Door, Inc. v. Charnes,(fn10) the Colorado Court of Appeals held that special-order garage doors, installed by a contractor, are not subject to Colorado sales/use tax because they are not tangible personal property at the time the installation is completed and title passes to the purchaser. The garage doors become an integral and inseparable part of the realty on installation and lose their identity as tangible personal property.
The materials used to construct the doors would be subject to sales or use tax at the contractor's level under the existing regulation for taxation of construction materials.(fn11) To the extent that they are made to order, the doors do not fall within the "over-the-counter" provision of Special Regulation 11. This generally imposes sales tax on over-the-counter sales of completed units that are not made to order and that are subject to installation agreements.
The Raynor Door decision was based on Department of Revenue ("Department") Regulation 26-102.15, which defines the term "tangible personal property." For the years in question, this regulation provided that tangible personal property does not include property that is "irremovable without damage to the premises...." However, as of November 30, 1986, Regulation 26-102.15 was amended to provide that tangible personal property does not include property that "is removable only with substantial damage to the premises...." Therefore, it appears that the amendment to the regulation provides a broader definition of the term "tangible personal property." However, to date, the amended language has not been interpreted in a published judicial decision, and the Department has not published an official position on the change.
The Colorado Supreme Court, in Howard Electrical & Mechanical, Inc. v. Dept. of Revenue,(fn12) held that tangible personal property purchased within the Regional Transportation District ("RTD"), at retail prices under a sales tax license
Although the Regional Transportation District Act(fn13) provides expressly for a sales tax, it makes no provision for a use tax. However, the RTD legislation requires that the RTD tax be administered and enforced in the same manner as the tax imposed under Colorado Revised Statutes title 39, article 26. Article 26 contains both the state sales and use taxes. The court found that the Colorado use tax supplements the sales tax and is not a separate tax. Therefore, the court held that an RTD use tax is "implied" under the RTD legislation and that it should apply in...
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