SALES AND USE TAX EXEMPTIONS
What is the difference between a sales and use tax?
The Colorado sales and uses taxes are very similar. Sales tax is paid at the point of purchase; use
tax is paid at the point of use or delivery. The sales and use tax rates are the same. Currently,
both are subject to a seven percent limitation imposed by the state. The state=s portion is
currently three percent. A local unit of government may impose up to the total seven percent
The Colorado Use Tax is a consumer use tax that must be paid by the purchaser of goods in
cases when the seller did not or could not collect sales tax. A use tax is paid when an article is
used or after delivery is completed. A use tax must also be paid on the storing, withdrawing from
storage, moving, installing, or performing any other act by which control of an article is assumed
by the purchaser.
The Colorado Tax Code defines use tax as:
AA statutory municipality may impose a use tax only for the privilege of using or consuming
in the municipality any construction and building materials purchased at retail, or for the
privilege of storing, using, or consuming in the municipality any motor and other vehicles,
purchased at retail on which registration is required. A use tax cannot be imposed on the
storage of construction and building materials.”
What is the current Sales and Use Tax rate?
For real estate development, use tax is paid on the use of any construction or building materials.
It is paid at the time of use, not the time of purchase. The state imposes a sales and use tax of 2.9
percent. Many cities and counties impose their own local sales/use tax on purchases and
transactions within their boundaries. The Colorado Department of Revenue, in addition to
collecting state sales and use tax, collects sales tax on behalf of more than 175 cities and
counties. These jurisdictions are referred to as "state collected." All Colorado counties that
impose sales tax are state collected.
For information on local sales/use tax rates, see "Colorado Sales/Use Tax Rates" (DRP 1002).
This DOR publication is updated each January and July. You may obtain a copy on the Web at
www.taxcolorado.com or you may view sales tax rates at www.taxview.state.co.us
Sales and Use Tax Exemptions
Cities which have enacted a Ahome rule@ charter, and which have elected to administer their
own local sales and use taxes, are referred to as Aself-collected@ or Aself-administered@. Self-
administered jurisdictions have the right to establish their own regulations regarding imposing a
sales or use tax on specific goods and services.
For state-collected jurisdictions, most goods are subject to sales tax, and most services are not.
However, exempt services must be billed separately to keep their nontaxable status. This is
important for for-profit developers who are not exempt from sales and use tax. Non-profit
organizations can apply for a sales tax exemption by completing the Colorado Department of
Revenue=s application form DR 0715. This application form can be obtained from the
Department at www.revenue.state.co.us or by contacting the Department=s Taxpayer Service
Division at (303) 232-2416. Approval of this application will exempt these organizations from
sales and use taxes in state-administered jurisdictions.
Local Use Tax Exemptions & Rebates
The City of Longmont also has an Ordinance that provides for a rebate of city sales and use tax
for developers of the affordable housing. This rebate is available to affordable housing
developers along with a comprehensive menu of other local fees and taxes.
We are encouraging non-profit developers to apply through the appropriate local governments
and the state for sales and use tax exemptions. Most of the local governments administer these
exemption programs through their finance offices. Many local governments are posting these
applications for exemptions on their Web sites, if not, please contact the jurisdiction’s finance
Colorado currently has seventy-eight home rule cities. These cities can enact their own sales and
use tax policies. Many of these home rule jurisdictions simply require proof of an organization’s
IRS and State of Colorado tax exemption status. This process entails completion of a local
jurisdiction’s exemption application. In a few jurisdictions the application requirements may be
more extensive; approval of an exemption from sales and use tax is not automatic.
In a few cities the application for sales and tax exemption requires more information than an
organization’s non-profit status. These additional details may entail an organization’s charitable
mission and sources of financial support. These exemptions are not specifically for affordable
housing but for all non-profit charitable organizations.
The Colorado Constitution prohibits the waiver of taxes for for-profit organizations, so tax relief
must be structured as a rebate. The tax payment is made to the jurisdiction and a portion or all is
returned to the developer. The City of Fort Collins is currently operating under an Ordinance No.
191, 1999, which permits the rebate of sales and use tax on materials used in the construction of
affordable housing. The Fort Collins use tax rebate is not an exemption. Another advantage of
the Fort Collins ordinance is an authorization to defer the payment of sales and use tax to the
time of issuance of certificate of occupancy. In some cases this may be at least nine months after
the tax obligation, i.e. the purchase of construction materials.