A clear and simple explanation of taxes administered by the city's Sales Tax Division.

The tax regulations are the city's interpretation of the related tax code and are designed to help taxpayers understand the taxes administered by the Sales Tax Division. Each topic is written in layperson's terms with examples and links to the Boulder Revised Code (BRC). These regulations are not a substitute for the BRC, but are intended to be used as an interpretive tool in conjunction with the code in order to better understand the intent of the code. We hope that you find these regulations helpful and easy to understand. If you can't find the answer to your question, a taxpayer assistant is available at 303-441-3050.

Admissions Tax "intends that every person who pays to gain admission to any place or event in the city that is open to the public shall pay and every person, whether owner, lessee, or operator, who charges or causes to be charged admission to any such place or event shall collect the tax imposed by this chapter." (section 3-4-1, BRC, 1981) Organizations that have a Boulder tax exempt license are not required to charge the admissions tax (section 3-4-5(b), BRC, 1981).

Admissions tax shall be charged on the price of tickets sold for an event. The City of Boulder admissions tax rate is identified in section 3-4-2 BRC, 1981. Incidental food served at the event must be taxed by the provider at the applicable food service rate in force when the charge occurs. (See section 3-2-5(b) , BRC, 1981 for current food service rate.)

The 5.0 percent admissions tax may be included in the price of the ticket sold. An admission ticket selling for $20.00 equals admission of $19.05 and admissions tax of $.95.

Examples:

  1. A non-exempt organization holds a silent auction fund-raiser at a Boulder hotel. The organization sells admission tickets for $25.00, pays the hotel to serve free hors d'oeuvres and wine and has a cash bar. The organization must collect and remit admissions tax on tickets sold, remit food service tax on the sales at the cash bar (See TR18 "Eating and Drinking Establishments" for more detail), collect sales tax on the price of tangible personal property sold at the auction and pay food service tax to the hotel on the price charged for the wine and hors d'oeuvres.
  2. A movie theater in Boulder charges $7.50 per person to view a movie, $4.00 for a bag of popcorn and $2.00 for soda. The theater must collect and remit 5.0 percent or $.36 (($7.50/1.05)*5.0 percent) per each ticket sold for admissions tax, and collect food service tax on all food and drinks sold.

Sales tax applies to the entire amount charged to customers or clients for items of tangible personal property including, but not limited to, drawings, paintings, tapes, films, designs, photographs, lettering, assemblies and printed matter. Whether the item is used for reproduction or display purposes is irrelevant to its taxability. This includes "Labor used to render tangible personal property sold or leased into a form usable by the purchaser or lessee..." (section 3-2-2 (f)(5),"Taxable services",(4) BRC, 1981). If non-taxable services are commingled with charges for tangible personal property, the total amount is taxable (subsection 3-2-6(a), BRC, 1981).

Advertising agencies engaged in furnishing advertising services to their customers are required to pay sales or use tax on purchases of tangible personal property used in rendering their services (See: "Service Enterprises"). Non-taxable services, if separately stated, include, but are not limited to:

  • Writing copy for use in newspapers, magazines or other advertising or to be broadcast on television or radio.
  • Typesetting, color separation and design.
  • Compiling statistical and other information.
  • Placing or arranging for the placing of advertising in print media, billboards and other forms of outdoor advertising cards in cars, buses and other facilities used in public transportation.
  • Charges for supervision, consultation and research.

Examples:

  1. An advertising agency billed its customer $5,000 for 500 brochures and supervision of the project. The full $5,000 is taxable because the non-taxable service is commingled with the sale of tangible personal property. If the supervision was separately stated, only the amount charged for the brochures would be taxable.
  2. The advertising agency above paid a photographer $500 for use of a photograph for the cover of the brochure, $100 to a service for compiling statistical information used in the brochure and $400 for typesetting. The $500 for use of the photograph is taxable, but the other two charges are non-taxable services.

Agents, salespeople, auctioneers and manufacturer's representatives who are making sales in Boulder are making retail sales in the City of Boulder, unless the sale is to another reseller. The Boulder Revised Code defines "retailer" at section 3-1-1, as follows:

"Retailer means any person selling, leasing, renting, or granting a license to use tangible personal property or services at retail. Retailer shall include without limitation any:

  • Auctioneer;
  • salesperson, representative, peddler, or canvasser, who makes sales as a direct or indirect agent of or obtains such property or services sold from a dealer, distributor, supervisor, or employer;
  • Charitable organization or governmental entity which makes sales of tangible personal property to the public, notwithstanding the fact that the merchandise sold may have been acquired by gift or donation or that the proceeds are to be used for charitable or governmental purposes."

The Code defines "engaged in business in the city" at section 3-1-1, as follows:

"Engaged in business in the city means performing or providing services or selling, leasing, renting, delivering, or installing tangible personal property for storage, use, or consumption within the city."

Agents, salespeople, auctioneers and manufacturer's representatives must collect sales tax on retail sales.

"every person in the city who purchases at retail leases, consumes, stores, or puts to any use any tangible personal property or taxable services is exercising a taxable privilege." (subsection 3-2-1(a), BRC, 1981) "The sales tax is a transaction tax levied upon all sales, purchases, and leases of tangible personal property and taxable services sold or leased by persons engaged in business in the city and is collected by the vendor or lessor and remitted to the city." (subsection 3-2-1(b), BRC, 1981)

If the billing is done by a third party, such as an out-of-state company where the Boulder sales representative makes the retail sale, the third party (out of state company) must collect sales tax. If the tax is not collected by the third party, then the local representative is responsible for collecting and remitting the sales tax.

Examples:

  1. A California company hires a sales representative to call on Boulder businesses. By hiring a sales representative, the California company is now engaged in business in the City. Therefore, the company must apply for a business license and collect and remit sales tax on all sales shipped into the City of Boulder. If the company does not collect the tax, the representative is responsible for collecting and remitting it.
  2. A church receives tangible personal property donations from area businesses to be auctioned off at a fund-raiser. The church is an exempt entity, which means that it does not pay sales/use tax on property and services purchased and used in the regular activities to foster its religious or express charitable purposes. However, the church must collect sales tax when it sells tangible personal property or taxable services.

Agricultural producers are persons regularly engaged in the business of using land for the production of crops or livestock, including farmers, market gardeners, commercial fruit growers, livestock breeders, feeders, dairymen, poultrymen and other persons similarly engaged. It does not include a person who breeds or markets animals, birds or fish for domestic pets, nor a person who cultivates, grows or harvests plants or plant products exclusively for that person's own consumption.

The purchase of seed and fertilizer by an agricultural producer is exempt from sales/use tax. Fertilizer includes compounds of nitrogen, phosphorus, potassium, trace elements or similar materials or substances which provide essential plant food and which are absorbed by the growing plant. It does not include soil, sand, peat moss, limestone, disinfectants, mulches and similar materials primarily used to condition the soil or to preserve or facilitate plant growth, regardless of incidental nutritive value. These items are, therefore, subject to sales/use tax. Also taxable are the purchases of insecticides, fungicides, germicides, herbicides and similar substances.

Examples:

  1. A farmer purchases plant seed, fertilizer, peat moss and herbicide to be used on his land. When the crop is harvested, the farmer will sell his product at market. The plant seed and fertilizer are exempt from sales/use tax, but the peat moss and herbicide are subject to sales/use tax.
  2. The above farmer also purchases the same items for the family's vegetable garden. All of the items are taxable, because the farmer is now using these items for his own consumption.

Sales by Repair Shops

As a general rule for repair shops, the taxable amount is the total amount charged to the customer, less labor or service charges, if they are separately stated. Therefore, parts, fluids and accessories installed in automotive vehicles are subject to sales/use tax. Automobile dealers, garages and repairpersons must itemize parts, fluids, accessories, supplies and labor on customer invoices. If not itemized, the total invoice is subject to sales/use tax.

Shop supplies charged to a customer based on a flat charge or a percentage of other costs are also taxable. If exact charges for supplies are passed on to the customer without a mark-up and sales/use tax was paid by the repair shop when purchased, the charge for supplies would not be taxable.

If a repair shop sub-contracts a portion of the repair job to another repair shop, the total amount charged to the end customer is taxable, unless the charges for parts and labor are separately stated on both the sub-contractor's invoice and on the invoice to the end customer. If separately stated, only the parts would be subject to sales tax on the invoice to the end user.

Purchases by Repair Shops

The purchase for resale, by a repair shop, of parts, fluids, accessories or any other property would not be subject to sales/use tax. To qualify for this resale exemption, the item must become a physical component of or be permanently attached to the vehicle being serviced and sales tax must be collected by the repair shop for the amount charged to its customer.

The resale exemption does not apply and sales/use tax must be paid on purchases of service vehicles, machinery, equipment, supplies, tools or any other items purchased for a repair shop's own use or consumption. Supplies consumed during a repair include, but are not limited to, shop rags, sandpaper, masking tape, solvents, hand tools, rubbing compounds, paint thinner and cleaners.

Examples:

  1. An automobile repairperson charged their customer the following on an invoice: $75 brake pads, $5 air filter, $15 oil, $5 supplies (a flat charge) and $125 labor. The repairperson must charge tax on the brake pads, air filter, oil and supplies; the labor is not taxable to the customer. The repairperson must pay sales tax on the supplies when purchased or report use tax.
  2. An automobile repairperson charged their customer the following on an invoice: tune-up $225. The total invoice is subject to sales tax because it was not itemized.

Booth or chair rental in a barber or beauty shop is a taxable transaction for the portion of the rental contract that is for the use of tangible personal property or fixed assets associated with that space. Commission paid to the owner of the booth or chair in addition to the rental amount is not subject to sales/use tax. If the rental contract between the owner of the shop and the independent contractor does not separately state the portion applicable to tangible personal property and fixed assets, then 50 percent of the total charge to the independent contractor will be subject to sales tax.

Barbers and beauty shop owners are retailers and must collect sales tax on the sale of any supplies sold to customers. They are also consumers of any supplies used in providing their services and therefore, must pay sales tax or remit use tax on these supplies. These supplies include, but are not limited to, shampoo, conditioner, tints, colors, combs, brushes, hair dryers and curling irons.

Examples:

  1. A contract between a beauty shop owner and an independent contractor states that the independent contractor will pay the owner $250 for booth rental and 20 percent of the income derived from use of the space. The $250 is taxable and the 20 percent would be exempt from sales tax. If the contract stated a flat $400 for use of the space, $200 would be subject to sales tax.
  2. A beauty shop owner orders 2 cases of shampoo, one for use in the shop and the other for resale to customers. The owner must pay tax on the case purchased for use in the shop. If tax is not charged, the owner must report use tax. The owner must also collect tax on the sale of the shampoo to customers.

The purchase of tangible personal property by broadcasting stations for use in their operations inside the City of Boulder is subject to City sales tax. Personal property includes, but is not limited to, satellite dishes, transmitting towers, other electronic receiving or transmitting equipment, tapes, compact discs and equipment used in the studio, business office and general station facilities.

Tax must also be paid on the purchase price of promotional and advertising items. The purchase of items for resale would be exempt from City sales tax, provided that sales tax is collected on the price charged to the end user. The sale of on-air advertising spots would not be subject to sales/use tax.

Example:

  1. A Boulder radio station holds an event at the Boulder Reservoir. The radio station purchases t-shirts to be sold at the event and advertising flyers to promote the event. The radio station must pay sales tax on the flyers, but not on the t-shirts, because they were purchased for resale and sales tax will be collected on the price charged at the event.
  2. A Boulder radio station purchases two transmitting towers, one to be delivered and installed in Boulder the other in Nederland. Sales tax is due on the tower delivered and installed in Boulder. The tower installed in Nederland is not subject to Boulder sales/use tax, provided that the tower is delivered to Nederland. If both towers were shipped to the radio station in Boulder, then ownership passed in Boulder and both towers would be subject to Boulder sales/use tax.

The Boulder Revised Code (Code) states at paragraph 3-2-2(a)(8), "A sales tax is due upon the purchase price paid for the transmission of intrastate electronic messages as defined in section 3-1-1, BRC, 1981." Transmission of intrastate electronic messages is a taxable service and is defined at section 3-1-1 , BRC, 1981 as "Transmission of intrastate electronic messages originating within the city by means of microwave, telephone, telegraph, or cable transmission, including cable, microwave, or other television service for which a charge is imposed."

The charges for connecting or installing cable are taxable. "Labor used to render tangible personal property sold or leased into a form usable by the purchaser or lessee and the charge for connecting or installing taxable services for the purchaser or lessee;" (section 3-1-1"Taxable services", (5), BRC, 1981). The following table lists specific services that appear on bills and their specific taxability:

Description

Tax status

Comments

Basic Cable Service

Taxable

The minimum level of service

Extended Basic Service

Taxable

An optional level of service available to basic subscribers

Digital Cable

Taxable

An optional level of service available to basic subscribers

Premium Channels

Taxable

An optional level of service available to basic subscribers. The channels in this level can be purchased individually or as a group

Music Channels

Taxable

Optional

Charge for Changing Service Tiers or Equipment

Taxable

Falls under installation

Installation Charges

Taxable

Installation charges including, but not limited to, relocating outlets and upgrading or downgrading non-addressable converters

Leased Equipment

Taxable

Leased equipment including, but not limited to, remotes, converter boxes or other equipment

Sale of Equipment

Taxable

Sale of equipment including, but not limited to, remotes, converter boxes or other equipment

Connect VCR

Exempt

Except for any material or equipment used.

Repair Charges

Exempt/Taxable

Materials taxable, labor exempt

The Boulder Revised Code allows exemptions for charitable, religious and governmental entities from paying sales, use, food service, accommodations and admissions tax on items and services purchased. This exemption does not exempt these organizations from collecting and remitting sales tax on the sale of tangible personal property and taxable services, food service tax on the sale of food and beverages, accommodations tax on accommodations sold by or on behalf of the exempt organization. The organization is exempt from collection of admissions tax on admissions provided that the organization holds a proper City of Boulder exempt license.

To qualify for the charitable, religious and governmental exemption, the organization must meet the following provisions:

  • Qualify as a governmental or charitable organization;( see below)
  • The purchase is of property or services to be used in the conduct of the organization's regular activities to foster its religious governmental or charitable purpose; (example: a bible study conference would be exempt, but a church sponsored ski trip would not be exempt)
  • The purchase is paid for directly by the organization without reimbursement therefore, and the purchase generates for the organization no "unrelated business taxable income" as defined in Section 512 of the United States Internal Revenue Code; (example: members cannot make specific donations to the organization for an event and then have the organization pay for an event tax free)
  • If religious or charitable, the organization obtains from the city manager an exempt institution license under section 3-17-4, "Exempt Institution License," BRC, 1981, and presents the license to the vendor at the time of the purchase or sale; and
  • The property or service purchased or sold is not for use in construction projects, as defined in section 3-1-1, "Definitions," BRC 1981, when provided under construction contract to the charitable, religious or governmental organization by an independent contractor.

The following persons are exempt:

Governmental Exemptions: "The United States government and all departments and institutions thereof, the State of Colorado and the departments, institutions, and political subdivisions thereof, and the city, but only in the exercise of their governmental functions and only when purchases are supported by official government purchase orders and paid for by draft or warrant drawn on the government's account directly to the seller." (subsection 3-2-7(a), BRC, 1981)

Charitable Organization defined at section 3-1-1, BRC, 1981: "Charitable organization means any entity which has been qualified by the United States Internal Revenue Service as a tax exempt organization under Section 501(c)(3) of the United States Internal Revenue Code."

Charitable organizations must be licensed as a tax exempt entity by the City of Boulder in order to make tax exempt transactions in the City. Not all not-for-profit organizations are exempt. An organization must apply for a license to be tax exempt by the City of Boulder (section 3-17-4 BRC, 1981).

Acceptable forms of payment to comply with the above payment requirement shall be:

  • Check from the exempt entity
  • Purchasing card from the exempt entity, US Bank State of Colorado Purchasing Cards, "State Tax Exempt" MasterCard or Visa cards, Federal GSA SmartPay cards or other purchasing or procurement cards billed directly to the exempt organization (other credit cards in the employee's name are not acceptable as they are billed to the employee and not directly to the exempt entity). (See "Purchasing Cards" for more detailed information)
  • Purchase order resulting in a direct bill to the exempt organization and direct payment from the exempt organization.

Examples:

  1. A federal government employee is staying in Boulder, and the visit is within the scope of their duty as a government employee. The employee is billed accommodations charges at the hotel, meal charges at local restaurants and charges for toiletries from the hotel gift shop. The employee presents a tax exempt GSA SmartPay credit card to pay for the hotel, and a personal credit card for the meals and gift shop purchases. The hotel charges would be exempt from accommodations tax, because the payment will come directly from governmental funds. However, the payment for meals and gift shop purchases would be subject to sales tax. The meals would not be paid directly from government funds and the purchase of toiletries are not purchases used in the conduct of the organization's regular activities and are also not paid directly from governmental funds.
  2. A properly licensed Boulder exempt organization holds a fund-raiser at the Boulder Reservoir. The organization charges $10.00 for admissions and sells food, beverages and t-shirts. The organizations rents volley ball set-ups, picnic tables and umbrellas from the Reservoir. The organization is exempt from paying tax on the rental items from the Reservoir, and collection of admissions tax on the $10.00. The organization must collect food service tax on the food and beverage and sales tax on the t-shirts. (see "Fund Raising" for more details)

The sale of a cigarette is exempt from sales/use tax in the City of Boulder. However, the sale of any other tobacco product is subject to sales/use tax in the City (subsection 3-2-6(i), BRC, 1981). The State of Colorado at paragraph 39-28-202(4)(a) CRS, defines "cigarette" as:

"cigarette means any product that contains nicotine, is intended to be burned or heated under ordinary conditions of use, and consists of or contains: (I) Any roll of tobacco wrapped in paper or in any substance not containing tobacco; or (II) Tobacco, in any form, that is functional in the product, while, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette; or (III) Any roll of tobacco wrapped in any substance containing tobacco that, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette described in subparagraph (I) of this paragraph (a)."

The State of Colorado collects an excise tax on the sale of cigarettes and distributes the proceeds to Colorado cities.

The sales of cigars, chewing tobacco, pipe tobacco, snuff and products used in conjunction with these tobacco products are taxable. If one of the above tobacco products are sold in a vending machine, the tax can be included in the sales price.

See: Electronic Smoking Devices for more information.

Example:

  • A smoke shop sells a pack of cigarettes, a bag a pipe tobacco, 2 cigars and rolling papers. The shop must collect sales tax on all of the items sold except the cigarettes.

The retail sale of computer software is subject to the City of Boulder sales/use tax unless the cost of modification of the software is greater than 25 percent of the price of the unmodified software. Therefore, custom made software is exempt from sales/use tax. The Boulder Revised Code at section 3-1-1 includes the following definition of computer software:

"Computer software means digital products, software programs, software as a service, internet subscription service, software license fees, software maintenance agreements, and software contained on cards, tapes, discs, coding sheets or other machine-readable or human-readable form, including software that has been modified so long as the price of the modifications does not exceed twenty-five percent of the price of the unmodified software and excluding software created specifically for the user."

A lease, lease purchase agreement, rental or the grant of a license to use software is subject to sales/use tax. The full amount paid for the right to use the software is subject to sales/use tax regardless of how the software is obtained. The Boulder Revised Code at section 3-1-1 includes leases, rentals and grants of a license to use taxable services under its definition of "purchase or "sale":

"(b) A lease, lease-purchase agreement, rental or grant of a license, including royalty agreements, to use tangible personal property or taxable services, including without limitation access services and linen services;"

Examples:

  1. A Boulder business purchases an accounting software package for $50,000.00 which includes the standard accounting software and modifications. The standard software sells for $35,000.00 and the modifications charge is $15,000.00. The purchase of the software is exempt from sales/use tax because the modifications charge is greater than 25 percent of the standard software package.
  2. A Boulder business enters into a licensing agreement with a software company to pay $10,000.00 per month for the right to use the software company's new inventory control package. The full $10,000.00 per month is subject to sales/use tax.
  3. A Boulder business purchases Secure Socket Layer (SSL) Website encryption certificates, which are down loaded on a server at the business by remote access to the encryption code coming from the seller’s source. The business also purchases and downloads anti-virus software updates through a web based retailer. Both of these transactions are subject to sales/use tax.

Sales tax must be collected on the retail sale of consigned inventory. The consignee must collect and remit the sales tax to the City. Consigned inventory is owned by the consignor, but the City holds the consignee, the vendor who actually makes the retail sale, accountable for tax collection.

Examples:

  1. An art gallery (consignee) displays and sells artwork owned by local artists (consignor). When the artwork is sold, the gallery (consignee) must collect sales tax and remit it to the City of Boulder.
  2. An auction house (consignee) collects estate items from various sources (consignor). When items are sold at auction, the auction house (consignee) must collect sales tax and remit it to the City of Boulder.

Permitted Projects

A contractor, defined at subsection 1-2-1(b) BRC, 1981, generally means any person, other than an employee of the real property owner or lessee, who performs work on a construction project. The Boulder Revised Code (Code) defines "construction project" at section 3-1-1 as:

"Construction project means the erection, installation, alteration, repair, or remodeling of a building or structure upon real estate and any other activity for which a building permit is required under this code or any other ordinance of the city."

Person Responsible for Use Tax: The person responsible for obtaining a construction or building permit is liable for all use taxes due on construction materials and other tangible property and taxable services used in the city. The “responsible person,” defined in the Code at 3-1-1, means (a) the contractor responsible for the construction of a permitted project, or (b) the contractor responsible for construction for a federal, state, or local government that is not required to get a permit from the city, or (c) if no contractor is used for a permitted project, the homeowner receiving a permit from the city to build or make improvements to the homeowner’s personal residence.

By this definition, the person responsible for paying the tax is the consumer of construction materials and supplies used in the construction project. A responsible person may not avoid the payment of the sales/use tax by use of provisions in the construction agreement or by use of a tax-exempt entity on any invoice or purchase order. The contractor is the responsible party even if the contractor is not named as the agent of such tax-exempt entity. No exemption certificate issued by the Colorado Department of Revenue or any other taxing authority will be recognized as a basis for exemption from Boulder sales/use tax. Therefore, all construction materials used in Boulder are subject to Boulder sales/use tax.

Tax on Construction Materials: The use tax credit for taxes paid to other municipalities set forth in subsection 3-2-8(b)(6) of the Code does not apply to sales tax paid on construction materials. The Code defines "construction materials" at section 3-1-1as:

"Construction materials means tangible personal property which, when combined with other tangible personal property, loses its identity to become an integral and inseparable part of a completed structure or project. Construction materials include, without limitation, such things as: asphalt, bricks, builders' hardware, caulking materials, cement, concrete, conduit, electric wiring and connections, fireplace inserts, electrical heating and cooling equipment, flooring, glass, gravel, insulation, lath, lead, lime, lumber, macadam, millwork, mortar, oil, paint, piping, pipe valves and pipe fittings, plaster, plumbing fixtures, putty reinforcing mesh, road base, roofing, sand, sanitary sewer pipe, sheet metal, site lighting, steel, stone, stucco, tile, trees, shrubs and other landscaping materials, wall board, wall coping, wall paper, weather stripping, wire netting and screen, water mains and meters, and wood preserver. The above materials, when used for forms, or other items which do not remain as an integral or inseparable part of a completed structure or project, are not construction materials."

Construction material use tax for construction projects, other than projects done specifically under contract with the City of Boulder, may be paid in the following ways: (subsection 3-17-6 , BRC, 1981)

1. Prepayment of the tax by either the responsible person, or separately by a subcontractor electing to do so, at the time a building or right of way permit is issued, on the estimated percentage basis, based on a percentage of the total valuation of the construction contract determined in subsection 4-20-4(d) of the Code, “Building Contractor License, Building Permit Fees, and Payment of Estimated Use Tax;” or

2. Prepayment of the tax directly to the city by a contractor that is doing a project that does not require a city permit because the project is being done for a federal, state, or local government; or

3. Filing a use tax return on a monthly or other basis approved by the city manager under subsection 3-17-7(c) of the Code, and payment of the tax by the twentieth day of each reporting period for the previous reporting period after obtaining a sales and use tax business license; or

4. Payment of the tax directly to a retailer that has a sales and use tax business license from the city. This option cannot be used when tax is prepaid in accordance with paragraphs 3-17-6(a)(1) or (a)(2) , BRC, 1981.

Tax on Tangible Personal Property (Non-Construction Materials): All tangible personal property used in the City of Boulder, regardless if it is construction materials or not, is subject to Boulder sales and use tax. Tangible personal property that 1) does not become a permanent part of the real property; and 2) can be removed without causing significant damage to the realty; and 3) can be removed without altering the intended functional use of the structure are not considered construction material, but this property is still subject to sales and use tax. Examples of this property are appliances, custom cabinets, carpeting, removable countertops, patio covers, and other similar items.

Other items purchased for use at the job site that are not construction materials include but are not limited to tools, portable toilets, temporary offices, office supplies, office equipment, hay bails, temporary fencing and signs, temporary walls, barriers, safety equipment, rental equipment, food and other similar items. The primary taxation distinction between construction materials and other tangible personal property is as follows:

  • Boulder tax must be paid on all construction materials installed in the city regardless of where it is purchased. No credit of City of Boulder tax will be given for taxes paid to other cities or states.
  • If (non-construction material) tangible personal property is purchased or rented outside of Boulder, credit will be given for a legally imposed city tax paid to another jurisdiction. See also section 3-2-8 of the Code. These purchases are no different from any other normal retail sale, so Boulder or another city tax may be charged to the purchaser by the vendor at the time of purchase.

Examples : Construction Material Use Tax Paid in Error - A contractor picks up construction materials from a vendor in Denver and brings it back to Boulder for use on a permitted project. The vendor charges Denver city tax because the contractor did not present the Boulder permit showing tax was prepaid. No credit can be given for the Denver tax paid, so Boulder tax is still owed on purchase price of the materials.

The same contractor picks up a stove and microwave in Denver and is charged Denver city tax. Since these are not construction materials, and a legally charged tax was imposed, no Boulder tax is due. If the stove and microwave were delivered to the Boulder job site and no city tax was charged by the vendor, the contractor would be required to remit Boulder use tax on the cost of the appliances.

Permit Application: When the responsible person (contractor or homeowner) is calculating the project valuation for permit purposes, items that are not construction materials do not have to be included. However, because all tangible personal property is subject to Boulder’s sales/use tax, if the vendor does not charge Boulder tax at the time of purchase, these purchases must be added to the cost of all materials when completing the project reconciliation. In order to avoid a potential tax liability at the end of the project, the contractor or homeowner can elect to prepay additional use tax when purchasing the permit without having to increase the valuation and permit fees.

Prior to beginning construction work in Boulder, the contractor must apply for a building permit. When taxes are prepaid in accordance with subsection 4-20-4(d) of the Code, the permit will allow the contractor to purchase construction materials from vendors in other municipalities free of the other municipalities' sales tax.

Note: It is critically important that the Boulder permit placard and receipt showing the pre-payment of Boulder city and county taxes be distributed to the contractor’s employees and subcontractors so they can present it to construction material suppliers in order to avoid paying city taxes twice.

The following chart explains the application of city tax to construction materials versus all other tangible personal property (TPP):

Description of Purchase

Application of City Tax When Tax is Prepaid on a Boulder Permit

Construction materials purchased inside or outside the City of Boulder

  • Boulder tax must be paid. To avoid also paying another city's tax when purchasing construction materials, the permit placard and receipt showing prepaid tax must be presented to all vendors.
  • Purchaser should contact vendor for refund of other city's taxes if charged in error.
  • If vendor collected and reported Boulder tax, credit is allowed.

Non-construction material TPP purchased in Boulder

  • Boulder tax should be charged by the vendor and remitted to the city.
  • Permit cannot be used to purchase this property city tax-free because purchase is for non-construction materials. Therefore, permit placard does not apply.

Non-construction material TPP purchased and picked up in another city

  • The vendor will likely charge tax for the city where they are located. Boulder gives credit for this legally imposed tax.
  • Permit cannot be used to purchase this property city tax-free because purchase is for non-construction materials. Therefore, permit placard does not apply.

Non-construction material TPP purchased from any vendor that delivers to Boulder job site

  • Vendor must have a Boulder sales tax license in order to charge and collect Boulder tax.
  • If Boulder tax is properly charged, credit is allowed.
  • If another city tax is charged and the vendor is not licensed with Boulder, it is not a legally imposed tax and credit is not allowed. Purchaser should contact vendor for refund of the taxes charged in error.
  • If no tax is charged on delivered materials, the cost of these purchases must be included in the final cost or contract price. Refer to reconciliation instructions on the Construction Use Tax Web page here.

If a vendor is located in the state of Colorado, the vendor shall charge State sales tax and any applicable RTD, Cultural District, Football Stadium and County sales tax. This is also true of other municipalities' building permits when presented to Boulder vendors; the Boulder vendor shall not charge Boulder sales tax, but will charge State, RTD, Cultural and Football Districts and County tax, unless the contractor also has an exemption certificate from the State of Colorado.

Contractor Labor: Contractor labor is exempt from sales/use tax if it is separately stated and the contractor is not a vendor, manufacturer, or retailer. When a contractor is also a vendor, manufacturer or retailer the following applies:

  • A vendor or retailer that also acts in the capacity of a contractor must report and pay use tax on materials taken from its own inventory that are used for a construction project. The amount of the tax is based on the retail market price of these materials, less any mark-up.
  • A contractor that is also the manufacturer of the materials or other items of tangible personal property that are to be incorporated into a structure must base the tax on the retail value of the item that would ordinarily be derived from the retail sale of the items manufactured by the contractor. This measure of value does not apply to a manufacturer that has not, within the year prior to the use of the items in question, sold a similar manufactured item at retail. The measure of value in this situation would be the cost of materials used.

When working on projects outside the purview of a permit, the construction company is not considered a contractor. Refer to Non-Permitted Projects below.

Construction Project Reconciliation Threshold

Final Contract Price Reconciliation Required
Less than $75,000 No
$75,000 or more Yes- Due within 90 days
of completion of project

Non-Permitted Projects

Construction projects that do not require a City of Boulder permit fall under one of two categories: 1) time and material jobs or 2) lump sum jobs. When a project does not require a permit and construction use tax is not prepaid on a permit, sales or use tax must be reported and paid by the construction company at the time the project is completed or at the time the customer is billed as follows:

Time and Materials Jobs: Construction companies, landscapers and any other companies that invoice separately for labor and materials must obtain a sales and use tax business license and charge sales tax on the retail price of all materials. Contractors performing such work are referred to as “retailer-contractors” and are retail merchants of building supplies and materials. “Retailer-contractors” must break out materials and labor on their invoices and charge retail sales tax on the materials. Materials purchased by “retailer-contractors” should be purchased tax free (at wholesale) because they are being purchased for resale. The sales tax collected from the customer is reported and paid to the City of Boulder on a monthly or quarterly sales/use tax return. Repair and installation labor charges are not subject to tax if separately stated on the invoice. If repair and installation labor are not separately stated from materials on the invoice, the entire charge is subject to tax. Refer also to "Repair Work".

Lump Sum Jobs: Construction companies that bid, perform and invoice lump sum contract work on real property are the consumers of the materials used to complete the work. In this respect, they are treated like contractors working on permitted jobs. However, because no use tax is prepaid on a permit, such companies are responsible for paying use tax directly to the City of Boulder or paying sales tax to the vendor at the point of purchase on all materials, supplies, tangible property rentals and taxable services used to complete the project. These companies must obtain a sales and use tax business license from the City of Boulder and report use tax as they perform work in the City of Boulder. Use tax is due on materials and supplies whenever another legally imposed tax rate equal to or greater than the total Boulder combined tax rate has not been paid to the vendor. Refer to section 3-2-8 of the Code.

Construction companies that perform work without a written contract but choose to bill the job on a lump sum basis are representing themselves as contractors, so are responsible for paying the use tax on materials and supplies. If the construction company pays city sales tax at point of purchase and can prove their materials costs are passed along to the customer at exact cost, with no markup, no additional city tax is owed. Otherwise, lump sum construction jobs are treated as retail sales and the construction company must collect and report sales tax as described under “Time and Materials Jobs” above. Construction companies engaged in business in the City of Boulder in the capacity of a seller or user of tangible property and taxable services must obtain a sales and use tax business license, and report and pay Boulder city tax through monthly, quarterly, or annual sales/use tax returns as noted in subsections 3-2-2(a) and 3-17-7(c) of the Code.

For any construction work that does not require a permit, if sales tax is not collected or paid, or use tax not properly reported by the construction company doing the work, use tax must be paid by the customer on the price of all taxable materials and taxable services purchased.

Example: Lump Sum Job (use taxable) : A construction company bids to repair drywall, add texture, and paint all rooms of a Boulder hotel. In addition, they will repair or replace broken or worn tile as needed. This work does not require a permit. The Boulder hotel enters into a written fixed price contract with the construction company to complete the work for $25,000. As no permit exists, there is no permit placard to indicate prepayment of construction use tax. The construction company is responsible for the taxes on all materials used, so must report use tax directly to the city through tax returns on the cost of all materials and supplies where city tax was not charged by the vendor at point of purchase regardless of the city where the purchase took place. Because this is non-permitted work, if the construction company is not licensed and fails to report tax on the materials, the hotel may be held responsible for tax on the materials.

Completed Units of Tangible Personal Property

Certain items when installed outside the scope of a permit are considered completed unit retail sales. These items include but are not limited to: appliances, automated building control systems, carpeting & pad, custom cabinetry, removable countertops, fencing under 3 feet, removable fixtures, furniture, garage doors and openers, hot tubs, internal signage, trees, shrubs, sod and other landscape materials, storm doors and windows, window coverings, patio covers, and prefabricated (above ground) swimming pools. Tax must be charged on the retail price of these units. If not collected by the seller, the purchaser must remit use tax on the purchase price.


Example: Lump Sum Job (completed unit retail sale) : A construction company bids to install two replacement windows and new countertops at a Boulder residence and then enters into a written fixed price contract with the homeowner to complete the work for $8,000. Because the windows and countertops are completed units, the construction company must treat the sale as a retail sale by separating the price of the units sold from the installation labor. Sales tax must be charged on the price of the units and reported on the construction company’s Boulder tax return.


Construction Work for Governments and Other Tax-Exempt Institutions, Including City of Boulder Contract Projects

Contractors are the users and consumers of construction materials and taxable services when doing construction in the city. Contractors working on buildings and any other structures owned by governments or other tax-exempt entities in the city may not be required to pull a city permit, but are required to pay use tax on such construction materials and taxable services. Before a contractor initiates a construction project for a tax-exempt entity for which a permit is not required, the contractor must complete the “Prepaid Tax Estimate for Contractors Working on Construction Projects Not Requiring a City Permit,” and prepay city use tax on either fifty percent (50 percent) or thirty percent (30 percent) of the contract price , depending on the type of construction (refer to chart below). This prepayment form is available under the Construction Use Tax page. Within ninety days of completion of the project, the contractor is required to file a reconciliation in accordance with subsection 3-17-9(b) of the Code.

Construction use tax for City of Boulder construction projects are paid as follows: All City of Boulder projects must pre-pay city construction use tax based upon the following percentages:

Type of Contract

Percentage of Contract Amount to Which Use Tax is Applied

  • Building construction
  • Landscape installation
  • Playground construction/installation

50 percent

  • Construction in the city's right-of-way
  • Sewer or water line installation or rehabilitation
  • Stand alone site work

30 percent

The applicable percentage is applied to the contract price and the result is multiplied by the city’s current tax rate to determine the prepayment tax due. At the time the contractor applies for final payment on contracts, it must submit to the city’s Sales and Use Tax Division, Boulder Reconciliation Form 15, insert link which is attached to the general conditions of the city's standard public work's construction contract. The Division will determine the total amount paid by the city for the work under the contract and compute the total use tax due based on the above percentages.

Contractors have the option to use either the actual method or the short (48 percent/52 percent) method to complete the reconciliation. After the total tax payment is received by the city's Sales and Use Tax Division, it will approve Form 15. After paying all use tax due, the contractor may request an audit by the city. Depending upon the determination of the city's tax auditor, the contractor will either be refunded use tax or be required to pay the city additional use tax owed.

Construction Equipment

Equipment Rentals: Construction equipment and any other equipment that is rented by a contractor or homeowner for use on a Boulder construction project is subject to sales/use tax. Charges for the use of any equipment in Boulder, whether on an hourly, daily or other periodic rate are considered rental of equipment and are subject to sales/use tax. If charges for the operator of the equipment are not separately stated from the rental of the equipment, the total charge is subject to sales/use tax. If the equipment is picked up in another city and that city’s sales tax is charged by the company renting out the equipment, credit is given for that tax. If the rental equipment is delivered to the Boulder job site, the rental company must be licensed to charge Boulder tax. If Boulder sales tax is not properly charged, use tax must be paid by the contractor or homeowner renting the equipment. The cost of these rentals must be included in the actual total cost of taxable purchases if the actual method is selected to do the project reconciliation.


Example : Equipment Rental with Operator - A contractor contracts with an equipment dealer for a backhoe with an operator for a charge of $250.00/day. The charge for the operator is not separately stated. Therefore, the entire charge for the contract is subject to sales/use tax. If the operator labor charges were separately stated on the invoice, they would not be taxable.

Construction Equipment Used by its Owner: "Construction equipment means equipment with a purchase price of $2,500 or more used in the erection, installation, demolition, alteration, repair, remodeling or landscaping of a building or structure upon real estate" (section 3-1-1, BRC, 1981). Construction equipment does not include “automotive vehicles” as defined in section 3-1-1 of the Code. Construction equipment is not pre-owned property that is considered to be permanently transferred into the city as described in "Use Tax – Pre-Owned Property Transferred into the City".

Owners of construction equipment are responsible for filing equipment declarations and paying any tax that may be due when using the equipment in Boulder (subsection 3-2-2(a) of the Code). The use of construction equipment in Boulder with a purchase price $2,500 or more is subject to use tax based on the length of time it is located within the city and the age of the equipment on the day it is brought into the city as follows: If located within the city for more than thirty (30) consecutive calendar days, use tax is due based on the full “Value of the Equipment.” If located within the city for less than thirty-one (31) consecutive calendar days, one-twelfth (1/12 or 8.33 percent) of the “Value of the Equipment.”

The "Value of the Equipment" is determined by the age of the equipment on the first day that it is located in the city for each and every different construction project as shown in the chart below:

Age of Equipment on 1 st Day Located in City for Each Different Project (based on last purchase)

Taxable Value of the Equipment

Between 1 day and 5 years (1825 days)

Purchase Price

From 5 years (1825 days) through 10 years (3650 days)

Greater of book value or fair market value (FMV) on first day located in the city

Greater than 10 years (3650 days)

This equipment is not subject to Boulder’s use tax

The equipment cannot be moved in and out of the city during a single project to avoid having it located in the city for more than 30 consecutive days with the intent of avoiding paying tax on the full value of the equipment.

A credit will be granted against the city's use tax due equal to the tax paid as required by law to another municipality or state (subsection 3-2-8(b) of the Code).

When another city sales/use tax equal to or greater than Boulder’s (city only) tax rate or a total tax greater than or equal to Boulder’s total (city and state collected) rate has been paid on the purchase price of construction equipment, the tax obligation on that purchase has been satisfied. Examples of satisfying the tax obligation may include construction equipment taxed by the city where the construction equipment is stored at the time of purchase, or through an equipment declaration or audit of another city. Each time the equipment is sold it is subject to the sales or use tax.

Reporting: Equipment construction use tax is reported on a Construction Equipment Declaration Use Tax Return. The declaration form and instructions are available under the “Equipment Declarations” menu on the right side of the construction use tax web page. The filing requirements (see chart below) are detailed in the Code in subsection 3-2-2(a)(12).

Filing requirements are based on the length of time the equipment is located in the city as follows:

Amount of Time Equipment is Located in City

Filing Requirement

Less than 31 consecutive days

Equipment declaration must be filed within 20 days of removal of the equipment from the city

More than 30 consecutive days

Initial equipment declaration must be filed within 90 days of first day each piece of equipment is brought into the city, and every 90 days thereafter until all equipment has been moved out of the city.

Combination of equipment located in city less than 31 consecutive days and more than 30 consecutive days

An equipment declaration and any tax owed must be filed within 20 days of removing any equipment from the city. For the equipment that remains in the city for more than 30 consecutive days the declaration is required as specified above. Once equipment has been located in the city for more than 30 consecutive days, an amended declaration and any tax owed is due the earlier of 90 days from the date it was moved into the city or 20 days after the equipment was moved out of the city.

If the required equipment declarations are not filed on time, as provided in the Code in subsections 3-2-2(a)(10) and (12) , the equipment is treated as though it was located in the city for more than thirty (30) consecutive days and the full value of the equipment is subject to tax. The one-twelfth pro-ration provided in the Code in subsection 3-2-2(a)(10) cannot be used.

Examples: Construction Equipment Declaration - On Nov. 5, 2020

ABC Company (equipment owner) brings their crawler loader to a Boulder job site and uses it for 25 consecutive days before moving it back to its storage site in unincorporated Jefferson County on Nov. 30th. Because it is stored at an unincorporated address, no city tax was paid at the time it was purchased. ABC Company paid $50,000 for the loader in June, 2016 and has previously paid Denver tax of $291.67 on 2/12ths of the cost because it was used on two separate projects in Denver for periods of 30 days or less. If ABC Company files the equipment declaration on time (by Dec. 20, 2020), ABC Company is required to pay tax on one-twelfth of the purchase price as follows: ($50,000 x 3.86 percent = $1,930/12 = $160.83 Boulder tax due.) The fact that tax was previously paid to Denver on 2/12ths does not impact this calculation.

If the declaration was not timely filed and paid, tax would be due on the entire $50,000 purchase price, less the Denver tax that was previously imposed as follows: ($50,000 x 3.86 percent = $1,930 - $291.67 Denver tax = $1,638.33 Boulder tax due.)

Sales of containers, labels, shipping cases, tags, cartons, packing cases, wrapping paper, twine, wire, bags, bottles, cans or other articles or receptacles are taxable unless the sale is a wholesale transaction or a sale that meets the definition of "exempt commercial packaging materials". (section 3-2-6 (d), B.R.C.1981) "Exempt commercial packaging materials means containers, labels and shipping cases used by a person engaged in manufacturing, compounding, wholesaling, jobbing, retailing, packaging, distributing, or bottling for sale, profit or use, that meet all the following conditions:

(1) Used by the manufacturer, compounder, wholesaler, jobber, retailer, packager, distributor, or bottler to contain or label the finished product;

(2) Transferred by said person along with and as a part of the finished product to the purchaser; and

(3) Not returnable to said person for reuse."

Returnable containers, containers purchased for non-shipment to customers and all containers shipped to service enterprises (See "Service Enterprises") are taxable. Deposits collected for returnable containers are taxable, and the tax is refundable when the deposit is returned.

Examples:

  1. A glass manufacturing company purchased bubble wrap to wrap its product for shipping, 20 pallets for shipping, 20 pallets for stock storage and address labels for the billing department. The bubble wrap and the 20 pallets for shipping would be exempt from sales/use tax. The 20 pallets for stock storage and the address labels for the billing department would be subject to sales/use tax because it does not meet the definition of "exempt commercial packaging materials". The items were purchased for the company's own use.
  2. A moving company purchases various size boxes for storage of customers' items during the moving process. The company does not charge its customers separately for these boxes. These boxes are subject to sales/use tax by the moving company because it is a service company and the purchase does not meet the definition of "exempt commercial packaging materials".

Coupons

There are two kinds of coupons, manufacturer's coupons and store coupons. A manufacturer's coupon is issued by the manufacturer for presentation to a retailer for a reduction in the sales price of the manufacturer's product. The retailer receives reimbursement from the manufacturer for the amount of the reduction. A store coupon is issued by a retailer for a reduction in the price of an item sold by the retailer and for use only in the retailer's business. There is no reimbursement to the retailer for the reduction in price.

The sales tax basis is the total value of money, credits and property received, and this includes any reimbursement from the manufacturer. Therefore, when a manufacturer's coupon is used, the full sales price before subtracting the coupon is subject to sales/use tax. There is no reimbursement to the retailer when using a store coupon. Therefore, only the reduced price, the sales price less the coupon amount, is subject to sales/use tax.

The sale of coupon books to the general public is not a taxable transaction. The publisher of the book must pay sales/use tax to the printer based on the cost of the book.

Discounts

To determine the tax basis of a sale subject to a discount you must first determine if the discount stands without a future event or if the discount is determined by a future event. Discounts that are determined by future events are taxable at the full price, not the discounted price; and discounts not determined by future events are taxable at the discounted amount.

A trade or quantity discount is a reduction of the selling price, usually expressed as a percentage of a list price. The reduction in the selling price is not contingent upon any other event. Therefore, the discounted price is the taxable basis. A cash discount usually appears on an invoice as discounted terms (e.g. 2 percent 10, Net 30). A cash discount is contingent upon a future event (when payment is made). Therefore, the sale is taxable at the full price, not the discounted price.

Examples:

  1. A grocery store chain publishes coupons weekly in the area newspapers. When a coupon is redeemed at the time of purchase the amount subject to sales tax is the reduced amount, the sales price less the coupon amount.
  2. A shampoo manufacturer mails $1.00 off coupons for the purchase of a new shampoo. When a coupon is redeemed at the time of purchase, the retailer must collect tax on the full price of the shampoo, the price before the deduction for the coupon, because the retailer will be reimbursed for the amount of the coupon.
  3. An industrial supply house sells light bulbs for $2.50 each and gives a quantity discount of 5 percent for the purchase of 25 or more. If a customer purchases 2 light bulbs the taxable amount would be $5.00; but, if the customer purchased 25 bulbs the taxable amount would be $59.38, the discounted amount. The discount is not contingent on a future event. Therefore, the amount subject to sales tax is the discounted price.
  4. The above supply house offers discounted terms on its invoices of 2 percent 10, Net 30. This means that if invoices are paid within 10 days, 2 percent can be discounted from the invoice. If a customer's invoice is $200.00 and the payment is made within 10 days, the customer can take the 2 percent discount from the $200.00, but the amount subject to sales tax is $200.00, not the discounted amount. The full price is subject to tax because the discount is contingent on a future event, the payment of the invoice.

The sale of a custom-made dental prosthetic device by a dental laboratory to a licensed practitioner of dentistry for use by a specific individual is exempt from sales/use tax (subsection 3-2-6(j), BRC, 1981). A dental prosthetic device is a replacement for lost or missing natural parts or is the addition of a device to aid the dental bodily functions. Dental prosthetic devices include, but are not limited to, inlays, crowns, dentures, bridges, retainers, gold, silver or other restorative materials used for fillings and similar custom manufactured items.

The above exemption does not apply to equipment, tools, materials or supplies used by the dentist to provide care to their patients. These items include, but are not limited to, novocaine, nitrous oxide, orthodontic supplies, dental equipment, furnishings, disposal gloves, cups, floss or any materials or supplies used by the dentist that do not become a component part of the prosthetic dental device.

Laboratories that manufacture dental prosthetic devices may purchase any materials exempt from tax (subsection 3-2-6(c), BRC, 1981), that will become a component part of the prosthetic devices. However, the lab must pay tax on any materials and supplies used in the manufacturing process that do not become a component part.

Examples:

  1. A dentist purchases dental molds, novocaine, toothbrushes, disposal face masks and a customized crown and bridge. The dentist must pay sales tax on all the above items with the exception of the customized crown and bridge. The other items are for use in providing care to his/her patient and therefore, taxable.
  2. A dental lab purchases porcelain, gold and dental molds for manufacturing crowns and bridges. The porcelain and gold are tax exempt, but the molds are part of the manufacturing process and do not become a component part of the crowns and bridges. Therefore, they are taxable.

Drugs are classified as either, "dispensed in accordance with a prescription"(prescription and/or chart ordered drugs) or as "over-the-counter". Drugs dispensed in accordance with a prescription are usually exempt from sales/use tax, but over-the-counter drugs are taxable. Sales of drugs for use on non-humans are taxable. This includes prescriptions written by veterinarians.

The Boulder Revised Code defines prescription drugs for humans as "a drug which, prior to being dispensed or delivered, is required by the federal Food, Drug, and Cosmetic Act, 21 U.S.C. Sect. 301, et. seq., as amended, to state at a minimum the symbol "Rx Only," and is dispensed in accordance with any written or electronic order dated and signed by a licensed practitioner of the healing arts, or given orally by a practitioner and immediately reduced to writing by the pharmacist, assistant pharmacist, or pharmacy intern, specifying the name and any required information of the person for whom the medicine, drug or poison is offered and directions, if any, to be placed on the label." (section 3-1-1 , BRC, 1981) These prescription drugs, when prescribed in writing by a licensed physician as "chart ordered" and administered from a pharmacy during a patient's stay in a hospital are exempt from taxation, provided that they are separately billed to a specific patient.

Drugs purchased in bulk by outpatient facilities are exempt from sales/use tax, provided there is directive written by a licensed practitioner for a specific patient and there is a separate billing to the patient. Any drugs purchased that do not meet this requirement are considered to be consumed by the facility in providing medical services and would, therefore, be taxable to the facility. However, any vaccination or immunization drug that is regulated by U.S. federal or state governments is exempt.

Over-the-counter drugs are purchased without a prescription and are usually prepackaged and sold to the general public. Therefore, they are subject to sales/use tax. Over-the-counter drugs include, but are not limited to, aspirin, pain relievers, cold remedies, ointments, cough syrup, vitamins and food supplements. Over-the-counter drugs are exempt from taxation only when prescribed for immediate dispensation from a hospital or medical clinic pharmacy by a licensed physician for treatment during a patient’s stay, provided that they are separately billed to a specific patient.

Examples:

  1. A doctor writes a prescription for an antibiotic for his patient and tells him to take aspirin and cough syrup every four hours. The patient goes to the pharmacy and purchases the antibiotic prescription, aspirin and cough syrup. The antibiotic is exempt from sales/use tax, but the aspirin and cough syrup are taxable because there were no prescriptions written and over-the-counter products were purchased.
  2. A patient is admitted to a hospital and a physician orders the following for his care: Tylenol, IV fluids and antacid. The order is dispensed by the hospital pharmacy on behalf of the physician and will be itemized on the patient's bill. These items will be exempt from sales/use tax.
  3. A patient visits his physician because he stepped on a rusty nail. The physician administers novocaine, removes the nail, cleans up the wound and gives the patient a tetanus shot. The bill separately states the tetanus shot but not the novocaine. Therefore, the tetanus shot is exempt from sales/use tax. The physician must pay sales/use tax for the novocaine because it was consumed by the physician in providing medical services.

"Food service establishment means any place that is kept or maintained for the purpose of preparing or serving food, but does not include: (section 3-1-1, BRC, 1981)

  1. Homes containing a family, related by marriage, blood, or adoption up to the second degree of consanguinity, and its nonpaying guests;
  2. Outdoor recreation locations where food is prepared in the field rather than at a fixed base of operations;
  3. Hospital and health care facility feeding operations licensed by the Colorado Department of Health or its authorized agents or employees;
  4. Child care centers licensed by the State of Colorado or Boulder County;
  5. Vending machines;
  6. Grocery stores and similar establishments, if such grocery store or similar establishment meets the qualifications for participation in the federal food stamp program pursuant to 7 C.F.R. subparagraphs 278.1(b)(1)(i),(ii) and (iii), as such subparagraphs exist on Oct. 1, 1987, or as thereafter amended, whether or not such grocery store or similar establishment is actually authorized to so participate;
  7. Food or beverage manufacturing, processing, or packaging plants that are not categorized as food service establishments by the Colorado Department of Health;
  8. Food caterers that use the customer's kitchen to prepare food."

Food service tax must be collected by food service establishments whether the food is eaten at the establishment or off its premises. The rate of tax can be found at subsection 3-2-5(b) , BRC, 1981 . "Cover charges, admission or entrance fees, and mandatory service or service-related charges shall be included as part of the purchase price of such food..." unless "the full amount of the charge is passed on to the employees of the food service establishment who have provided direct service to each person paying the charge, and if all federal and state income and other applicable taxes due on such charge have been withheld by the food service establishment and paid to the appropriate government (subsection 3-2-5(b), BRC, 1981)."

Sales tax must be separately stated on the bill or invoice of the service establishment, with the exception of vending machines and drinking establishments selling drinks by the glass. The tax may then be included in the selling price.

Food give-a-ways including, but not limited to, "happy hour" buffets, continental breakfast, peanuts and pretzels are subject to sales/use tax to be paid by the eating or drinking establishment, based on the cost of the food to the establishment. Food served at a fund-raiser when an admissions charge is paid is subject to food service tax to be paid by the fund-raiser (See: "Fund Raising" for details). The admissions charge is subject to admissions tax (section 3-4-2, BRC, 1981) to be paid by the person paying the admissions charge (See: "Admissions Tax" for detailed information). Fund-raising meals are subject to food service tax for the portion of the price paid that is applicable to the customary selling price of the meal (See: "Fund Raising" for detailed information). Most fund-raising tickets will separate the meal amount from the donation amount.

Employers charging employees for meals and beverages must collect food service tax upon the selling price of the meals and/or beverages. If the meal is being subsidized by the employer, the actual cost of the meal may be higher than the selling price. But the tax continues to be based upon the selling price.

Eating and drinking establishments must pay sales/use tax on tangible personal property purchased for use in the operation of the business, including, but not limited to, equipment, fixtures, linens, silverware, china, glassware and table decorations. The purchase of disposable plastic and paper products served to and used up by the customer along with the meal or drink are exempt from sales/use tax. These disposable products include, but are not limited to, napkins, straws, plates, knives, forks, spoons and cups.

Examples:

  1. A Boulder organization sells tickets for two different fund-raising events. The first event is a silent auction where hors d'oeuvres are served and there is an admissions charge of $25.00. The second event is a dinner. The price of the ticket is $100.00, $25.00 dinner value and a $75.00 donation. For the first event, the organization must collect admissions tax on the $25.00 for the silent auction and pay sales/use tax on the price charged for the hors d'oeuvres. For the second event, the organization must collect food service tax on the $25.00 dinner value. (Note: the $25.00 charge for admissions and food service can include the admissions and food service taxes.)
  2. A sandwich shop purchases reusable plastic baskets, plastic serving utensils, napkins and mints. The mints are for customers which will be placed in a bowl by the exit door. The sandwich shop must pay sales/use tax on the plastic basket because it will not be used up by the customer along with the meal. Sales/use tax must also be paid on the mints, because they are not part of the meal and are given away by the sandwich shop. The plastic utensils and the napkins are tax exempt when purchases because they are included in the price of the meal.
  3. A restaurant serves a free buffet with the purchase of drinks in its bar. The restaurant also charges a 15 percent mandatory gratuity on parties of 5 or more. The gratuity is added to the tip fund and paid out equally in cash each night to the wait staff. No records are kept, and no income taxes withheld on the tips. The restaurant must pay use tax on the cost of the food given away on the buffet. The restaurant must also collect food service tax on the 15 percent mandatory gratuity, because it does not meet the exemption rules.

Electronic Smoking Devices (ESDs), including any refill, cartridge or any other ESD component, are subject to an additional city sales and use tax of 40%, effective for sales on and after July 1, 2020. Electronic Smoking Devices are defined in BRC 6-4.5-1 as:

“any product containing or delivering nicotine intended for human consumption that can be used by an individual to simulate smoking in the delivery of nicotine or any other substance, even if marketed as nicotine-free, through inhalation from the product. Electronic smoking device includes any refill, cartridge or component part of a product, whether or not marketed or sold separately. Electronic smoking device does not include any product that has been approved or certified by the United States Food and Drug Administration for sale as a tobacco cessation product or for other medically approved or certified purposes.”

Sales of ESDs are subject to both the regular city sales and use tax rate of 3.86%, which is remitted on the city sales and use tax return. The additional city sales and use tax rate of 40% on ESDs is remitted on the ESD city sales and use tax return. Sales of ESDs should be included in the gross sales and taxable sales reported on the city sales and use tax return, and in the gross sales and taxable sales reported on the ESD sales and use tax return. Both tax rates – 3.86% and 40% should be charged on ESD sales and collected from customers at the point of sale.

On sales receipts given to customers, the 40% tax must be separately stated from the product price and displayed in the same manner as all other retail sales taxes on the receipt. The BRC requires that retail sales taxes be displayed in such a way that the customer understands that the tax is on the retail sales price of the product. The BRC further states that the retailer may not absorb the tax or advertise or state that the tax will be absorbed or will not be imposed.

Products included in the definition of ESDs and subject to the 40% city sales and use tax on ESDs include (but are not limited to):

  • Atomizers
  • Batteries
  • Box Pod Mods
  • Cartomizers
  • Cartridges & Refills
  • Chargers
  • Cig-A-Likes
  • Clearomizers
  • Coils
  • Drip Tips
  • E-Cigarettes
  • E-Juices
  • E-Liquids
  • E-Tanks
  • Mods
  • Personal Vaporizers
  • Pod Mods
  • Regulated Mods
  • Tank Systems
  • Tanks
  • Vape DIY Tools and Parts
  • Vape Pens
  • Vape Pod Adapters
  • Vape Pods
  • Vape Skins and Cases
  • Wicks
  • Any other component of an ESD whether or not marketed or sold separately.

Products excluded from the definition of ESDs and exempt from the 40% city sales and use tax on ESDs include all other tobacco products as defined in BRC 6-4.5-1 (cigarettes, cigars, chewing tobacco, pipe tobacco etc) and any product which contains medical or recreational marijuana.

See: "Cigarettes, Cigars and Tobacco products" for more information.

Examples:

  • A tobacco retailer sells a pack of cigarettes, a bag of pipe tobacco, 2 cigars, rolling papers, and an e-cigarette. The retailer must collect the city’s 3.86% sales tax on all of the items sold except the cigarettes and must collect the additional 40% ESD tax on the e-cigarette.
  • A recreational marijuana retailer sells e-liquid containing THC. The sale of the e-liquid is subject to the city’s 3.86% sales tax and the 3.5% additional sales tax on recreational marijuana, but is not subject to the 40% tax on ESDs.
  • A tobacco retailer sells a reusable vaping pen, unflavored e-liquid containing nicotine, and flavored e-liquid that does not contain nicotine. The retailer must collect the city’s 3.86% sales tax on all of the items sold and must collect the additional 40% ESD tax on all items sold.

The retail sale of tangible personal property or taxable services that are not otherwise exempt would be subject to sales/use tax, unless the entity making the purchase is exempt from paying sales/use tax. The burden of proof for the exemption is on the person asserting the claim of exemption (section 3-17-2 , BRC, 1981). However, the vendor must retain proof of the exemption. If a dispute arises between the purchaser and vendor as to whether or not a sale or purchase is exempt, the vendor must charge and the purchaser must pay the tax and the purchaser may then request a refund from the City (subsection 3-17-14(b), BRC, 1981).

For a transaction to be exempt from sales/use tax in the City of Boulder, one of the following criteria must be met:

  1. The purchaser holds an exempt license, based on either the City of Boulder's charitable or religious exemptions rules or is a governmental entity. (See: "Charitable, Religious and Governmental Exemptions" for more detail) The vendor must document the exemption with a copy of the Boulder exempt license. The items purchased and the purchaser's payment method must meet the requirements for exemption for exempt entities.
  2. A copy of a building permit from a municipality is presented to the vendor from a contractor, showing that use tax was properly paid to the municipality and the purchase being made meets the definition of construction materials (section 3-1-1, BRC, 1981) and will be used on the permitted construction project. (See: "Construction and Contractors" for more detail) The vendor must document the exemption with a copy of the building permit.
  3. The purchaser is a manufacturer purchasing tangible personal property sold at wholesale that will actually be transformed by the manufacturing process and be a necessary and recognizable ingredient and component of the finished product. (See: "Manufacturers" for more detail) The vendor must document the exemption with a copy of the purchaser's City and State tax licenses.
  4. The purchaser is a wholesaler and the sale is a wholesale transaction of taxable property to a licensed retailer, jobber, dealer, or other wholesaler for purposes of taxable resale, and not for the retailer's, jobber's, dealer's, or wholesaler's own consumption, use, storage, or distribution (subsection 3-2-6(f) , BRC, 1981). The vendor must document the exemption with a copy of the purchaser's City and State tax licenses.
  5. The items being purchased are shipped outside of the City of Boulder. The vendor must document the exemption with evidence of the shipment (e.g. bill of lading, shipping log).

Examples:

  1. A construction company has a proper City of Longmont building permit that is presented to a Boulder supplier for the purchase of the following: wood, nails, hammer and gloves. The wood and nails would be exempt from sales/use tax, but the hammer and gloves do not meet the definition of construction materials and, therefore, are not covered by the building permit and are subject to sales/use tax.
  2. A Boulder not-for-profit organization makes a purchase from a Boulder vendor and presents the vendor with federal and state tax exempt licenses. Unless the organization has a Boulder tax exempt license, the vendor must charge city sales tax on the purchase.
  3. A supply house is being audited by the City of Boulder for compliance with the sales and use tax section of the Boulder Revised Code. The supply house contracts with UPS for most of its shipments outside of Boulder and the UPS logs are stored for 5 years. However, when a salesperson delivers products outside of Boulder, there are no shipping charges, nor are any logs kept. If tax was not charged on the non-UPS shipment invoices, the auditor will treat these invoices as taxable, because there is no documentation to prove the items were shipped outside of Boulder, rather than picked-up at the supply house.

Fabrication includes any operation which results in the creation, production or manufacture of an article of tangible personal property, or is a step in a process or series of operations resulting in the creation or production of such an article. Fabrication/manufacturing labor is subject to Boulder sales/use tax. The Boulder Revised Code (Code) includes fabrication/manufacturing labor in the definition of "price" or "purchase price" at section 3-1-1 , BRC, 1981: "The gross purchase price of articles sold after manufacturing or after having been made to order, including the gross value of all of the materials used, and the labor and services performed, and the profit thereon."

Labor used to render tangible personal property useable and charges for connecting or installing taxable services are subject to Boulder sales/use tax. This would include, but not be limited to, installation of telephone or other utility services, new telephone extensions or cable outlets or moving existing outlets. The Code includes this labor and these charges in the definition of "taxable services" at section 3-2-2(f)(5) , BRC, 1981: "Labor used to render tangible personal property sold or leased into a form usable by the purchaser or lessee and the charge for connecting or installing taxable services for the purchaser or lessee;"

Fabrication/manufacturing labor may be exempt from sales/use tax if the labor is construction labor. (See: "Construction and Contractors" for detailed information) Repair labor may also be exempt from sales/use tax. (See: "Repair Work" for detailed information)

Examples:

  1. A Boulder tool and die maker's invoice lists the following charges: materials $250.00 and labor $500.00. The total invoice is subject to sales/use tax, even though the charges are separately stated, because the labor is fabrication labor.
  2. A Boulder company receives an invoice from a supplier with the following charges: merchandise $500.00 and shipping, handling and set-up $25.00. The entire invoice is subject to sales/use tax because the handling and set-up charges are not separately stated.

Transportation or delivery charges are subject to Boulder sales/use tax. This includes, but is not limited to, freight, delivery charges, UPS charges and other like charges to transport tangible personal property. When other charges are not separately stated on the invoice and are commingled with delivery charges, such as set-up and handling charges, they would also be subject to sales/use tax. The Code includes these charges in the definition of "Price" or " purchase price" at section 3-1-1, BRC, 1981: "(e) Installation and wheeling in charges included in the purchase price and not separately stated. (f) Transportation and other charges to effect delivery of tangible personal property to the purchaser."

The freight charges are considered a part of the negotiated purchase price to the vendor. Therefore, freight, delivery or transportation charges billed by the vendor are subject to sales/use tax.

A contract between a delivery company and the purchaser of tangible personal property would be exempt from sales/use tax, provided that the purchaser pays the delivery company directly and the delivery charges do not appear on the seller's invoice. The freight charges would not be considered part of the negotiated purchase price. This would be considered a non-taxable service contract.

Examples:

  1. An industrial supply house purchases a case of cleaning fluid for resale from a vendor and a case of floor wax to clean the supply house floors from another vendor. The inventory invoice includes freight charges of $5.00 and the floor wax invoice includes shipping and handling charges of $5.00 and separately states wheeling-in charges of $2.00. The $5.00 freight charge for the inventory would not be taxable, because the purchase of the inventory is exempt from sales/use tax based on the wholesale exemption (subsection 3-2-6(f), BRC, 1981). The $5.00 shipping and handling charges for the floor wax would be taxable, but the wheeling-in charge would be exempt, because it is separately stated.
  2. A manufacturing company purchases a piece of equipment from a vendor and then contracts with a freight company to pick-up the equipment from the vendor and deliver it to the manufacturing company. The freight company bills the manufacturing company $120.00 for delivery. The freight charges are not part of the negotiated purchase price with the vendor of the equipment, and, therefore, would not be subject to sales/use tax.

Charitable organizations that are properly licensed in Boulder are exempt from paying sales tax on the purchase of any items to be raffled off or given away (e.g. door prizes) at fund-raising events. These gifts, prizes and other like items are "used in the conduct of the organization's regular activities to foster its religious or other express charitable purpose" (subsection 3-2-7(b), BRC, 1981). Items donated for raffles or to be given away at fund-raising events are subject to sales/use tax to be paid by the donor of the item.

Items purchased for auctions are exempt from sales/use tax, but sales tax must be collected from the purchaser on the price paid at auction. All items purchased to be resold at retail by fund-raisers are exempt from sales/use taxes when purchased (e.g. t-shirts, books, bumper stickers) but, sales tax must be collected on the full sale price of these items when resold. The tax must be separately stated. It can not be included in the selling price (subsection 3-2-4(b), BRC, 1981).

The Boulder Revised Code states at section 3-4-1 "that every person who pays to gain admission to any place or event in the city that is open to the public shall pay and every person, whether owner, lessee, or operator, who charges or causes to be charged admission to any such place or event shall collect the tax imposed by this chapter" (see section 3-4-2, BRC, 1981 for rate). Admissions tax must be collected for any fund-raising event charging a fee or a contribution to enter an event unless the fund-raiser holds a City of Boulder Exempt Tax License . The tax may be included in the ticket price, but then the fund-raiser must deduct the tax from the ticket price and remit it to the City. Any complimentary food served at the event, such as hors d'oeuvres, would be subject to food service sales/use tax to be paid by the fund-raiser, on the cost of the food, unless the fund-raiser holds a City of Boulder Exempt Tax License (see: "Charitable, Religious & Government Exemptions").

Fund-raising tickets that include a meal are subject to food service tax for the portion of the ticket price that is applicable to the customary selling price of the meal. The tax can be included in the ticket price. "Cover charges, admission or entrance fees, and mandatory service or service-related charges shall be included as part of the purchase price of such food. However, if the full amount of the service charge (tip or gratuity) is passed on to the employees of the food service establishment who have provided direct service to each person paying the charge, and if all federal and state income and other applicable taxes due on such charge have been withheld by the food service establishment and paid to the appropriate government, the mandatory charge is not taxable. (See: "Eating and Drinking Establishments" for more detail) (see subsection 3-2-5(b), BRC, 1981 for food service tax rate).

Examples:

  1. A Boulder, properly licensed, exempt organization sells tickets for two different fund-raising events. The first event is a silent auction where hors d'oeuvres, purchased by the exempt organization, are served and there is an admissions charge of $25.00. The second event is a dinner. The price of the ticket is $100.00, $25.00 dinner value and a $75.00 donation. For the first event, the fund-raiser does not collect admissions tax on the $25.00 for the silent auction, and will not pay sales/use tax on the purchase price of the hors d'oeuvres, because it is properly licensed as an exempt organization. For the second event, the fund-raiser must collect food service tax on the $25.00 dinner value. (Note: the $25.00 charge for food service may include the sales and food service taxes.)
  2. A properly licensed, Boulder exempt organization purchases a set of wine glasses, a cappuccino machine and a microwave to be given away as door prizes at its annual auction. A local houseware store donates a set of gourmet cookware to also be given away as a door prize. The ticket price to attend the auction is $50.00. Hors d'oeuvres will be served and there will be a cash bar. The organization is exempt from paying sales/use tax on both the door prizes and on the price paid for the hors d'oeuvres. It is also exempt from collection of admissions tax on the $50.00 ticket. Sales tax must be collected on the amount paid for the auction items and food service tax must be collected on the drinks sold through the cash bar. The houseware store must pay use tax on the cost of the cookware donated to the fund-raiser.

Accommodations Tax

The Boulder Revised Code states at section 3-1-1 "Lodging services or public accommodation means the furnishing of rooms or accommodations by any person, partnership, association, corporation, estate, representative, or any other combination of individuals by whatever name known to a person who for a consideration uses, possesses or has the right to use or possess any room in a hotel, inn, bed and breakfast residence, apartment hotel, lodging house, motor hotel, guesthouse, guest ranch, trailer coach, mobile home, auto camp, or trailer court and park, or similar establishment, for a continuous period of less than thirty days under any concession, permit, right of access, license to use, or other agreement, or otherwise."

The City of Boulder accommodations tax rate in force when the charge occurs, is identified in chapter 3-3, BRC, 1981.

  1. Differences from the State of Colorado Requirements - City of Boulder accommodations tax differs from the applicable State tax in that it is not a sales tax. The hotel/motel owner is not considered to be reselling the room. Therefore, any items purchased for use in any room covered by the accommodations tax are also subject to sales/use tax. Such purchases would include, but are not limited to, soap, shampoo, coffee, towels, bed linens, hangers, stationery, pens, tissue and glassware. Complimentary food, including but not limited to breakfast buffets, fruit, hors d'oeuvres and beverages, for which no additional price is charged, is taxable at the cost paid by the hotel or motel.
  2. Meeting and Banquet Rooms - From the effective date of these regulations, charges for the use of meeting and banquet rooms are exempt from both accommodations and sales tax.
  3. Requirements Related to Exempt Entities: section 3-2-7(a) & (b),BRC, 1981 states:
    1. Governmental Exemptions - "The US government and all departments and institutions thereof, the State of Colorado and the departments, institutions, and political subdivisions thereof, and the city, but only in the exercise of their governmental functions and only when purchases are supported by official government purchase orders and paid for by draft or warrant drawn on the government's account directly to the seller."
      Acceptable forms of payment to comply with the above requirements shall be:
      1. Check from the government agency
      2. US Bank State of Colorado Purchasing Cards, "State Tax Exempt" Mastercard and Visa cards, Federal GSA SmartPay cards or other purchasing or procurement card billed directly to the exempt organization (other government credit cards in the employee's name are not acceptable as they are billed to the employee and not directly to the exempt government agency). (See: "Purchasing Cards" for more detailed information)
      3. Purchase order resulting in a direct bill to the exempt organization.
    2. Charitable Organization Exemptions: - Charitable organizations are exempt from payment of accommodations tax if: "The purchase is of property or services to be used in the conduct of the organization's regular activities to foster its religious or charitable purpose." (paragraph 3-2-7(b)(1),BRC, 1981)(example: a bible study conference would be exempt, but a church sponsored ski trip would not be exempt.)
      To comply with the above requirement:
    3. The organization must be licensed as a tax exempt entity by the City of Boulder. Not all not-for-profit organizations are exempt. If the organization is not licensed as a tax exempt entity by the City of Boulder, the hotel/motel should direct it to contact the City's sales tax division to apply to be evaluated for such a license.
    4. The cost of the trip cannot be reimbursed by the organization to members of the organization or vice versa. To confirm that the organization meets the requirements, the hotel/motel should request a letter on exempt entity letterhead and signed by its executive director that includes the following statements:
      1. The activity is part of the exempt entity's regular activities.
      2. There is no reimbursement to members by the organization or vice versa.
    5. The hotel/motel should call the City of Boulder's sales tax division for direction when in doubt regarding exempt status.
    6. Payment must be directly from the exempt entity's funds (either a check or purchase order resulting in direct billing to the exempt entity). (See: "Charitable, Religious and Governmental Exemption" for more detailed information)

Sales/Use Tax:

The City of Boulder sales/use tax rate in force when the charge occurs is identified in section 3-2-5 (a), BRC, 1981 and shall be charged for sale of tangible personal property or taxable services.

  1. Access services - a charge to customers for access to phone service is taxable. A charge for local calls or the additional amount charged by the hotel for long distance calls, whether inter or intra-state, is also taxable. (BRC, 1981, section 3-1-1 "Purchase" or "Sale" includes access services.) If sales tax on access services are not charged to the consumer, the hotel/motel shall accrue and remit the appropriate amount as use tax.
  2. Video rental - if the rental fee is not charged to customers by the hotel/motel and the rental service company charges Boulder tax to the hotel/motel, no additional tax is due. Most often the rental service company charges a set fee, but does not collect City tax. In that situation, sales tax should be collected from the customer on the price charged. If no rental fee is charged to the consumer, the hotel/motel is required to accrue and remit use tax on the price paid to the service provider.
  3. Postcards, toiletries and any other items sold from front desk or lobby of the hotel/motel are taxable.

Food Service Tax:

The City of Boulder food tax rate in force when the charge occurs is identified in subsection 3-2-5(b), BRC, 1981.

  1. Food sold in or by a food service establishment - Cover charges, admission or entrance fees and mandatory service or service-related charges shall be included as part of the purchase price of such food and taxes shall be charged and remitted at the food service tax rate.
  2. Charges to employees for meals are taxable at the food tax rate on the amount charged to the employee.
  3. Food given away to employees or guests in a hotel/motel is subject to use tax payable by the hotel/motel at cost at the sales/use tax rate in force at the time of the transaction.
  4. Any mandatory service or service related charge included on a bill for food service is taxable at the food service tax rate. The only exception is from the effective date of this regulation, a mandatory gratuity that is passed on to wait staff will be non taxable, provided the employer can prove that the full amount was passed on and that appropriate income tax was deducted.

Admissions Tax:

"An excise tax... on the price paid to gain admission to any place or event in the city that is open to the public. "Admissions Tax shall be charged on the price of tickets sold for an event. Incidental food served at the event must be taxed by the hotel/motel, at the applicable food service rate in force when the charge occurs and collected from the event organizer.

The City of Boulder admissions tax rate in force when the charge occurs is identified in section 3-4-2, BRC, 1981

Use Tax:

Use tax must be accrued and remitted to the City on all items subject to sales tax where the vendor did not charge sales tax because it was not licensed with the City or because the hotel/motel withdrew items from inventory and where sales or use tax had not been previously paid.

  1. All items purchased for use at a hotel/motel are taxable. This includes, but is not limited to, soap, shampoo, coffee, towels, bed linens, hangers, stationary, pens, tissue and glassware, as well as any furniture and fixtures purchased.
  2. Free food in lounge area or free food provided to overnight guests is taxable at cost to the hotel/motel.
  3. Repair and maintenance services - parts and materials are taxable to the hotel/motel when the hotel/motel purchases them for use. If another company is hired to do repairs or maintenance and the materials used are insignificant to the service performed, the repairer will pay sales tax when they purchase the materials. If the parts and materials are significant to the repair work and are commingled with service charges on the repairer's invoice, the whole amount charged is taxable to the hotel/motel. (See: "Repair Work" for additional details)
  4. Manufacturing labor is taxable. If a hotel/motel hires a vendor to manufacture (fabricate) tangible personal property, the labor used to fabricate that item is taxable. This is different from the requirements applicable to repair and maintenance. (Example: If a hotel/motel hires a woodworker to custom-build a table or a bar, the entire cost of the table or the bar is taxable, even if the bill separately states material and labor, since this is considered fabrication labor. If the hotel/motel later hires the woodworker to refinish the table or the bar and the bill separately states material and labor, the material is all that is taxable, since the labor is considered repair labor.) (See: "Fabrication/Manufacturing Labor" for additional details)
  1. A maintenance agreement that includes tangible personal property (example: a software update) and in which the personal property is not separately stated is taxable. A maintenance agreement with separately stated service labor and parts is taxable for the parts portion only. A service agreement for labor only is non-taxable. (See: "Maintenance Contracts, Service Agreements & Warranties" for additional details)

"All sales, leases, and purchases of tangible personal property and taxable services defined in the chapter are taxable unless specifically exempted in the chapter." (subsection 3-2-1(a), BRC, 1981)

The right to use or possess tangible personal property and taxable services under a lease agreement is subject to Boulder sales tax. If the lessor is not licensed to collect sales tax for the City of Boulder, the lessee must remit use tax. All charges pursuant to the lease contract are considered part of the lease "purchase price" (section 3-1-1, BRC, 1981) and are sales/use taxable. This includes charges for warranties and property taxes, regardless of who receives the payments.

If the rental item is picked up by the customer or its agent in another city, the first month's rent is paid to the city where the item was picked up. All remaining lease payments are subject to the City of Boulder's sales/use tax.

If the rental of equipment includes an operator to run the equipment, the charges for the operator are exempt from sales/use tax, provided that the labor charge is separately stated on the invoice. If not separately stated, the entire charge is subject to sales/use tax. (See: "Construction and Contractors" for information regarding construction equipment)

If the lease meets the definition of a capital lease, the sales/use tax must be paid on the total selling price (the sum of all lease payments, up-front payments, freight and any additional charges paid to the lessor) at the start of the transaction, not on each lease payment as it is made. There is no refund or credit for either party to the lease transaction, if the property is repossessed by the vendor.

"Whenever tangible personal property, including property sold in conjunction with the sale of a business, is sold under a conditional sales contract, lease-purchase contract, or capital lease contract, whereby the vendor or lessor retains title as security for all or part of the purchase price or whenever the vendor retains a chattel mortgage on such tangible personal property to secure all or part of the purchase price, the sales tax is immediately due and payable upon the total selling price. There is no refund or credit for either party to the transaction if the property is repossessed by the vendor." (paragraph 3-2-2(a)(7), BRC, 1981)

"Capital lease means a lease with characteristics of a purchase, including without limitation, a lease term corresponding to the useful life of property, the lessee's payment of costs of property incidental to ownership, or the lessee's option to purchase for less than fair value."(section 3-1-1, BRC, 1981)

A sale lease back transaction is considered to be a single transaction provided that there is an explicit intent at the time of the original purchase for the leaseback transaction and that the period between the original purchase and the leaseback transaction does not exceed 90 days. Tax would then be collected once, usually at the time of the original purchase based on the purchase price of the item and then tax credit would be given on the second and third transaction. If the period is greater than 90 days or there is no explicit intent then the original purchase and the sale to the leasing company would be subject to sales/use tax, but the leaseback would be exempt.

In the case of an exempt entity purchasing an asset for a sale lease back; the original transaction would be exempt from Boulder sales tax based on the exempt status of the entity. However, the sale to the leasing entity could be taxable based on their taxable status and there not being tax on the original transaction to credit the balance of the transaction. If the exempt entity sells the equipment to a licensed leasing company, that is a company in the business of leasing equipment; the second transaction would be exempt based on the leasing company being a wholesaler and the final leaseback transaction being a resale transaction. The final transaction would also be exempt based on the exempt status of the entity. If the original purchaser sells to an entity other than one in the business of leasing equipment, the second transaction would be subject to sales tax because the entity is not a wholesaler and therefore, can not be exempt from Boulder sales tax. The final transaction back to the exempt entity would be exempt based on its exempt status.

Linen and diaper services are subject to sales/use tax. However, if the linens and diapers are owned by the customer, then the transaction would be a non-taxable service (See: "Service Enterprises" for detail). The fees paid for recyclable solvents, filters, ionization tubes or other like items that are reprocessed and reused are also rental fees and subject to sales/use tax.

Examples:

  1. A Boulder business picks up a piece of equipment in Denver that will be leased for six months. The lessor collects the first month's payment of $150.00 and charges Denver sales tax when the equipment is picked up. The lessor has many leasing customers in Boulder and has a Boulder sales tax license. The remaining 5 months of the lease would be subject to Boulder sales/use tax. Since the lessor is licensed to collect Boulder tax, the lessee does not have to remit use tax, provided the proper Boulder sales tax is charged on the invoice. If the lessor was not licensed in Boulder, the lessee would have to remit use tax to Boulder.
  2. A Boulder developer has an agreement with an aviation company to lease a helicopter to shuttle potential investors between the developer's sites. The helicopter includes the pilot, but the invoice and contract agreement states $500.00 per hour for helicopter rental. The total $500.00 would be subject to Boulder sales/use tax, because the labor was not separately stated.
  3. A Boulder business has a lease with a computer company for a computer system. The lease is for 3 years, at a cost of $6,000.00 per month and at the end of the lease the title passes from the lessor to the lessee. The purchase price of the system at the time the lease is signed is $200,000.00. The lease is a capital lease because it meets the definition of a capital lease by meeting three of the characteristics from the definition: the useful life of the computer system is 3 years, and the lease is for 3 years; the purchase price is $200,000.00, and the payments equal $216,000.00; and the title passes to the lessor at the end of the lease which is less than fair value. In this case the lease contains all three characteristics of a capital lease. However, only one of them needs to be present for it to be a capital lease. The lessor must collect and remit Boulder sales tax on the full purchase price of $216,000.00. If the lessor does not collect the sales tax, the lessee must remit the use tax to Boulder

Licenses and royalty agreements to use tangible personal property or taxable services are subject to sales tax in the City of Boulder (paragraph 3-1-1, "Purchase" or "sale", (b), BRC, 1981). This includes, but is not limited to, software, prerecorded music, artwork and dies. This does not include licenses and royalty agreements for technology or manufacturing processes, the use of the written word or song lyrics.

The transfer to a publisher of an original manuscript by the author thereof for the purpose of publication is not subject to taxation, since the true object of the transaction is to provide the publisher with the author's words, which are intangible personal property and could be written on any medium. However, the tax would apply to the sale of mere copies of an author's works or the sale of manuscripts written by other authors where the manuscript itself is of particular value as an item of tangible personal property and the purchaser's primary interest is in the physical property. Tax would also apply to the sale of artistic expressions in the form of paintings, photographs and sculptures, even though the work of art may express an original idea, since the purchaser desires the tangible object itself; that is, since the true object of the contract is the work of art in its physical form.

Examples:

  1. A photographer sells royalty agreements to advertising companies that allow them the use of his photographs for advertising purposes. The sale of the royalty agreements are subject to Boulder sales tax.
  2. A manufacturing company pays a license fee to a software manufacturer for the right to use its software. This license is subject to the City of Boulder's sales tax. The same company pays a royalty to a limited liability corporation that owns a manufacturing process patent that is used in the company's manufacturing line. This is not a taxable transaction because the royalty is for the use of a manufacturing process.

Maintenance contracts, service agreements and extended warranties sold to maintain a specific piece of equipment or computer software beyond the manufacturer's original warranty may be subject to sales/use tax.

  • If the contract, agreement or warranty is a mandatory charge as a part of the original sale, lease or rental transaction, the charge would be subject to sales/use tax.
  • If the contract, agreement or warranty is for labor only and any parts will be billed to the customer separately, the contract, agreement or warranty would not be subject to sales/use tax (subsection 3-2-6(a), BRC, 1981). However, sales/use tax must be paid on any repair parts.
  • If the contract, agreement or warranty includes parts, materials or software updates and they are not separately stated, the entire amount of the contract, agreement or warranty is subject to sales/use tax. However, if the vendor has advanced approval in writing from the City Manager allowing the vendor to use a percentage of the total sales price to separate the parts, materials or computer updates from labor, then only the percentage of the total sales price allocated to parts, materials or computer updates would be subject to sales/use tax (subsection 3-2-6(b), BRC, 1981).

Examples:

  1. A software company sells an optional service agreement with the sale of its software package. The agreement consists of online support and updates which are not separately stated for $2,000.00 per year. The service agreement is subject to sales/use tax, because the update is commingled with the labor and there is no prior agreement with the City for only a percentage to be taxable.
  2. An equipment manufacturer sells an extended warranty with the purchase of any piece of equipment. The warranty is optional and for labor only. It begins after one year, when the original warranty expires. The warranty is not subject to sales/use tax, but any parts used during the extended warranty period would be subject to sales/use tax.
  3. A leasing company leases computers and requires that a maintenance agreement be sold with all leases. The maintenance agreement is subject to sales/use tax, because it is mandatory.

Manufacturing is the making of goods and articles by hand or by machinery. Manufacturers are exempt from paying sales/use tax on the purchase of "tangible personal property sold at wholesale that is actually transformed by the process of manufacture and becomes through the manufacturing process a necessary and recognizable ingredient and component of the finished product, and whose presence in the finished product is essential to the use thereof in the hands of the ultimate consumer" (subsection 3-2-6(c), BRC, 1981). This definition would include, but would not be limited to, component or piece parts, paint, glue, and screws.

Manufacturing supplies used in the process that do not become a necessary and recognizable ingredient and component of the finished product are subject to sales/use tax when purchased by a manufacturer. This includes, but is not limited to, electricity and power, machine oil, welding gases, cleaners and solvents. The State of Colorado has a utility usage exemption for manufactures, but the City of Boulder does not. Therefore, utility usage is subject to Boulder sales/use tax. (See the State of Colorado FYI - Sales Tax Exemption on Industrial Utility Usage and State of Colorado Special Industry Regulation - Gas and Electric for more information.)

The State of Colorado also has an exemption for the purchase of manufacturing equipment by manufacturers, but the City of Boulder does not. Therefore, the purchase of manufacturing equipment is subject to Boulder sales/use tax. (See the State of Colorado FYI Manufacturing Equipment Exemption for more information)

Examples:

  1. A manufacturer purchases the following items for use in manufacturing circuit boards: solder, welding gases, copper wire and latex gloves. The welding gases and the latex gloves are supplies used in the manufacturing process, not a necessary and recognizable ingredient and component of the finished product. Therefore, they are subject to sales/use tax. The other items will become an ingredient and component of the finished product that will be resold. Therefore, the solder and copper wire are exempt from sales/use tax.
  2. A manufacturer purchases new manufacturing equipment. The equipment is subject to Boulder sales/use tax, but may be exempt from State sales tax. (See the State of Colorado FYI Manufacturing Equipment Exemption for more information)

Medical supplies, as specified below, are exempt from sales/use tax in the City of Boulder (subsection 3-2-6(j), BRC, 1981) provided that "they are dispensed for the direct, personal use of a specific individual in accordance with a prescription or other written directive issued by a licensed practitioner of medicine, dentistry or podiatry" (section 3-1-1, BRC, 1981). The medical supplies must also be separately stated and billed to the patient or insurance company. If not separately stated and billed, medical supplies are assumed to be consumed by the physician. These supplies include the following:

  • corrective eyeglass lenses and frames
  • corrective contact lenses
  • wheelchairs
  • special medical beds
  • crutches
  • oxygen
  • hemodialysis products
  • hearing aids
  • hearing aid batteries
  • insulin
  • insulin measuring and injecting devices
  • glucose
  • human whole blood, plasma, blood products and derivatives
  • prosthetic devices
  • drugs (Visit "Drugs" for detailed information)
  • dental appliances (Visit "Dentists & Dental Labs" for detailed information)

The medical supplies exemption excludes items used or consumed by medical and dental practitioners or medical facilities in providing their services, even though these items may be packaged for single use to treat individual patients after which the item is discarded (section 3-1-1, BRC, 1981).

Examples:

  1. A dentist purchases dental molds, novocaine, toothbrushes, disposal face masks and a customized crown and bridge. The dentist must pay sales tax on all the above items with the exception of the customized crown and bridge. The other items are for use in providing care to the patient and, therefore, are taxable.
  2. A patient visits his physician because he stepped on a rusty nail. The physician administers novocaine, removes the nail, cleans up the wound and gives the patient a tetanus shot. The bill separately states the tetanus shot, but not the novocaine. Therefore, the tetanus shot is exempt from sales/use tax. The physician must pay sales/use tax for the novocaine because it was consumed by the physician in providing medical services.

Sales of caskets, urns, vaults, shipping boxes, clothing or other tangible personal property sold by morticians or funeral homes are subject to sales tax, even if the remains are consigned to a common carrier for delivery elsewhere, because the items were first used in Boulder. If the mortician or funeral home charges a lump sum for services without itemizing the tangible personal property, the entire amount charged is subject to sales tax.

Other services rendered by the mortician or funeral home are not subject to sales tax. However, the purchase of any material to provide the service is taxable to the mortician or funeral home.

Cemeteries must charge sales tax on the selling price of precast cement vaults, liners, markers, headstones and other tangible personal property sold. Any person building a structure in a cemetery is deemed to be contractor and would be subject to the regulations of contractors. (See: "Construction and Contractors")

Perpetual care or any charge for maintenance and lawn care of grave sites are not subject to sales tax. However, the purchase of material to provide the service is taxable to the service provider.

Example:

  1. A lump sum contract was written for a funeral that included all materials and services from the pickup at the morgue to the delivery of the deceased to the cemetery. Since the contract was not itemized, the entire amount charged would be subject to sales tax.
  2. A funeral home contract itemized the following: casket, body preparation, flowers, music, police escort and clergy. The funeral home must collect sales tax on the casket and flowers, the other items are non-taxable services. However, the funeral home must pay tax on any materials used in providing the services.

The sale of newspapers, newsprint and printer's ink are exempt from sales/use tax in the City of Boulder (subsection 3-2-6(n), BRC, 1981). The Boulder Revised Municipal Code defines newspapers at section 3-1-1 as:

"Newspaper means a publication, printed on newsprint, intended for general circulation, and published regularly at short intervals, containing information and editorials on current events and news of general interest. The term newspaper does not include: magazines, trade publications or journals, credit bulletins, advertising inserts, circulars, directories, maps, racing programs, reprints, newspaper clipping and mailing services or listings, publications that include an updating or revision service, or books or pocket editions of books."

Other printed matter that does not meet the definition of newspaper is subject to sales/use tax. Other printed matter includes, but is not limited to, magazines, trade publications or journals, credit bulletins, advertising inserts, circulars, directories, maps, racing programs, reprints, newspaper clipping and mailing services or listings, publications that include an updating or revision service, or books or pocket editions of books.

Printed matter which is distributed free of charge, whether distributed separately or as an insert in a newspaper, is subject to sales/use tax to be paid by the business that purchased the printed matter for distribution. Preprinted newspaper supplements which are inserted in a newspaper do not become a part of the newspaper and are, therefore, subject to sales/use tax, to be paid by the business that purchased the supplement. The Boulder Revised Code defines "preprinted newspaper supplement" at section 3-1-1 as:

"Preprinted newspaper supplement means an insert, attachment, or supplement circulated in a newspaper that; (1) is primarily devoted to advertising; and (2) the distribution, insertion, or attachment of which is commonly paid for by the advertiser."

Examples:

  1. A Boulder drug store sells Newsweek, the Boulder Daily Camera and the Wall Street Journal to a customer. The store must collect sales tax on the Newsweek magazine, because it does not meet the definition of newspaper. The Boulder Daily Camera and the Wall Street Journal are exempt from sales/use tax.
  2. A Boulder discount store purchases advertising flyers from the Boulder Daily Camera to be inserted in all the Sunday papers. The Camera must collect sales tax from the store for the total price charged for the inserts.

To determine if a vendor must collect a city's sales tax the vendor must first determine if there is "nexus" between the vendor and the city. To have nexus there must be a connection between a taxing jurisdiction and a vendor before the jurisdiction may require the vendor to collect the jurisdiction's tax. A vendor must meet the definition of "engaged in business in the city" for the City of Boulder to require it to collect the City of Boulder's sales/use tax.

The Boulder Revised Code states at section 3-1-1 "Engaged in business in the city means performing or providing services or selling, leasing, renting, delivering, or installing tangible personal property for storage, use, or consumption within the city. Engaged in business in the city includes, without limitation, any one of the following activities:

  1. Directly, indirectly, or by a subsidiary, maintaining a building, store, office, salesroom, warehouse, or other place of business within the city;
  2. Sending one or more employees, agents, or commissioned sales persons into the city to solicit business or to install, assemble, repair, service, or assist in the use of its products, or for demonstration, or for any other reason;
  3. Maintaining one or more employees, agents, or commissioned sales persons on duty at a location within the city;
  4. Owning, leasing, renting, or otherwise exercising control over real or personal property within the city; or
  5. Making more than one delivery into the city within a twelve-month period."

Examples:

  1. A carpet store that is located outside the City of Boulder sells carpet and delivers and installs it for customers in Boulder. The store has created nexus by performing services inside the City. Therefore, the store is required to be licensed with the City of Boulder and collect sales tax.
  2. A national women's store that is located in Boulder sends out catalogues to Boulder residences. The catalogue warehouse is in New Jersey and all shipments will be made from there. The store will have to collect Boulder sales tax on deliveries shipped from New Jersey, because the store has created nexus by having a location in the City.
  3. A computer leasing company located outside of the City of Boulder leases computer systems to Boulder vendors. The leasing company is required to have a sales and use tax license from the City because it is renting personal property within the City.

The sale of photographs and Photostat copies, including computerized, digital or other like products, are subject to sales/use tax. This also includes the sale of prints by photo finishers. The rental of, or royalties paid for, the use of photographs are also subject to sales/use tax.

Tangible personal property that becomes an ingredient or component part of photographs or Photostat copies, when purchased by photographers or Photostat producers, are exempt from sales/use tax. This property includes, but is not limited to, mounts, frames and sensitized paper. Materials used in the process of making the photographs or Photostat copies, but which do not become a component part of the photograph or Photostat copy, are subject to sales/use tax. This property includes, but is not limited to, film, chemicals, trays, plates, proof paper and cameras.

Physicians, surgeons, dentists, hospitals, X-ray laboratories and others who purchase X-ray film and then expose it for the purpose of diagnosis are considered the consumers of the X-ray. Therefore, tax applies to the purchase of all materials and supplies used to expose and develop the finished X-ray film. These materials include, but are not limited to, film and chemicals.

Examples:

  1. A Boulder newspaper pays a royalty to a photographer for the right to use a photograph on its front page. The royalty charge is subject to sales/use tax.
  2. A photographer purchases the following: sensitized paper, film, developer, proof paper and frames. The sensitized paper and the frames, provided that they are resold to customers, are exempt from sales/use tax. The other items are subject to sales/use tax, because they are used in the developing process and do not become a component part of the photograph being sold.

Printers selling printed matter are making taxable retail sales, provided that the purchaser does not resell the articles and uses, consumes or distributes them free of charge. The full purchase price of the printed matter is subject to sales tax. This includes materials, labor, supplies, overhead and profit. Labor and service charges, even if separately stated on the invoice, are taxable except where noted below.

If separately stated on the invoice, the services of typesetting and color separation, design and camera mechanicals performed by a printer or its subcontractor for a customer or another printer are not taxable. The purchase price or royalty paid for the use of the original artwork is taxable. However, the cost of the scan, velox or the process used to make an image usable for the printer is exempt from sales/use tax.

Generally, supplies and equipment used by printers in the printing process which do not become a component part of the printed product are subject to sales/use tax payable by the printer. This includes, but is not limited to, the following:

  • blankets
  • blanket conditioner
  • blanket saver
  • blanket wash
  • blender solution
  • *developer
  • dies
  • film
  • film developing
  • finisher
  • fixer
  • flash oil
  • grease
  • half tones
  • isopropyl alcohol
  • Kodak control strips
  • paper stop
  • photos/artwork
  • plate cleaner
  • plate finisher
  • plate preserver
  • plate saver
  • press wash
  • replenisher
  • roller wash
  • scratch remover
  • tape
  • **toner
  • water ductor

*This does not include developer used in the Xerox copy process.
**This does not include the toner used in lazer printers.

Exempt purchases of tangible personal property for resale include, but are not limited to:

  • Paper: paper stock on which the finished product is printed and delivered to the customer and wrapping materials for the finished products sold to customers
  • Ink: printers ink, ink additives, and overprint varnishes
  • Chemicals: anti-offset sprays, fountain etch solutions, gum solutions, and all component chemicals when used with the above materials
  • Materials: padding compound, stitching wire and staples, and book binders tape
  • Developer used in the Xerox copy process.

Printers performing services only are subject to the regulations governing service enterprises. (See: "Service Enterprises" for detailed information.)

Printed matter which is partially printed, invoiced to the customer, but held in stock for further imprinting is taxable on the full price charged by the printer. Sales tax must be collected on the selling price of each part of the job.

For commercial printing of postal cards or stamped envelopes purchased from the United States Postal Service, the amount subject to tax does not include the amount of postage involved.

Examples:

  1. A Boulder printer contracts with a customer to design and print an advertising brochure. The printer itemized the following on the invoice: design $250.00, typesetting $75.00, royalty paid for photo $150.00, labor $300.00 and materials $200.00. The design and typesetting are not subject to sales/use tax, but the other items are. Even if items are separately stated, the charges for materials, labor and royalties are subject to sales/use tax.
  2. A Boulder printer purchases the following to be used in their printing business: paper, assorted ink colors, plate cleaner, plate finisher, press wash, and film. The printer must pay sales/use tax on all the items except the paper and ink, which will be resold to customers. All the other items are used by the printer in the printing process, but not resold to customers.
  3. A Boulder printer designed and printed business cards for a customer. The order was for 10,000 cards to be printed with the company logo, address and central phone number. The cards are stored with the printer; and, as employees needed business cards, the printer pulls these cards from its stock and adds names, direct phone numbers and e-mail addresses. The first invoice is for $2,000.00: $250.00 design, $75.00 typesetting and $1,675.00 for the printing. The charge for adding each employee's name, phone number and e-mail address is $15.00 per 100 cards. Sales tax must be collected on the printing charge of $1,675.00 on the first invoice, but design and typesetting are not subject to sales/use tax. The charge for finishing the business cards is also subject to sales/use tax each time additional cards are sold.

The retail sale of gas, electricity and other fuels for any purpose are subject to sales/use tax, unless the sale is to a properly licensed charitable, religious or governmental entity. The retail sale is taxable whether sold for residential, commercial or industrial use and whether furnished by a municipal, public or private corporation.

The energy sold by the above, when used by a manufacturer, is considered to be used in the manufacturing process and to not be a component of the finished product. Therefore, the energy would not meet the resale exemption and would be subject to sales/use tax. The State of Colorado does exempt the use of some energy producing products when used for industrial purposes, see the State of Colorado FYI - Sales Tax Exemption on Industrial Utility Usage and Special Regulation - Gas and Electrical Services for detail. The City of Boulder does not have such an exemption.

Gasoline and aviation gasoline (see section 39-27-101 C.R.S.) fuels are not subject to City sales/use tax. However, if these special fuels are used for a purpose other than that stated in the Colorado Revised Statutes, they would be subject to sales/use tax. Aviation jet fuels (section 39-27-111 C.R.S.) are subject to Boulder sales/use tax. "Special Fuel," defined at (subsection 39-27-101(29) C.R.S.) is subject to Boulder sales/use tax unless excise tax has been charged and paid in accordance with (39-27-102 C.R.S.).

Examples:

  1. A Boulder manufacturer pays $15,000.00 for electricity to run its plant. The full amount is subject to sales/use tax for the City of Boulder, but the State of Colorado allows for a credit for part of the electricity.
  2. A Boulder gas station sells 10 gallons of gasoline, a candy bar and a soft drink. The gas station must collect sales tax on the sale of the candy bar and soft drink, but the gasoline is exempt from sales tax.

Visa and MasterCards which have the words "Purchasing Card" either embossed or silk screened on the face of the card are billed directly to the business rather than the individual whose name appears on the card. Therefore, if the purchase is an exempt purchase for the business entity purchasing the product or service, the use of the Purchasing Card will not void the exemption, since the bill will be paid directly from the funds of the organization.

The City of Boulder uses JP Morgan Chase Mastercard Purchasing Cards for all purchases. All properly authorized purchases are tax exempt when the purchasing card is used for payment. Many other cities and counties use various purchasing cards; and, provided that the words "purchasing card" appear on the card and the purchase is to be used by the government entity in the regular course of business, the purchase is tax exempt.

The State of Colorado uses US Bank Mastercard Procurement cards for non-travel related purchases. The words "Purchasing Card" or "Commercial" are printed on each card. Therefore, payment will be made directly from State funds, which make these transaction tax exempt. For travel related transactions the State uses US Bank Visa. If the card has "State Tax Exempt" followed by the agency's tax exemption number (98 followed by 5 digits) printed on the card, these transaction will be billed directly to the agency and funds will be paid directly from the agency's funds. Therefore, purchases paid for with these cards are tax exempt. If the US Bank Visa does not have the above notation, and only the employee's name, the employee will be billed and then reimbursed by the agency. Therefore, these transaction are taxable. (See the State of Colorado FYI - "Government Purchases Exemptions" for more information).

The Federal Government's credit card program is called GSA SmartPay. All purchases are divided into three types, Fleet, Travel or Purchasing. Federal agencies have the choice of using either three different cards, one for each type of purchase, or using an integrated card, one card for all purchases. (See the GSA Smart Pay website )

  • Fleet - The cards are Bank of America MasterCards. The fleet card has a picture of two cars on the background. All Fleet card purchases are tax exempt. The purchases are billed directly to the agency and paid directly from agency funds.
  • Travel - The cards will be either VISA or MasterCard. The travel card has a picture of an airplane on the background. Travel cards can be billed either directly to the agency or to the employee. To determine where the purchases are billed, you must look at the 6th digit of the card number. If the 6th digit is 0,6,7,8 or 9, the card purchases are directly billed to the agency and are therefore tax exempt. If the 6th digit is 1,2,3 or 4, the card purchases are billed to the employee and not directly to the agency. Therefore, they are taxable.
  • Purchasing card - The cards will be either VISA or MasterCard. The purchasing card has a picture of the capital without a flag on the background. All purchasing card purchases are tax exempt. The purchases are billed directly to the agency and paid directly from agency funds.
  • Integrated card - The cards will be either VISA or MasterCard. The integrated card has a picture of the capital and a flag on the background. If the purchase is a fleet or purchase card-type transaction, the purchase will be tax exempt. The bank will direct the bill to the agency for all fleet and purchase type transactions based on universal vendor codes. If the transaction is a travel purchase, you must look at the 6th digit of the card number to determine if it will be billed to the agency or the employee. If the 6th digit is 0,6,7,8 or 9, the card purchases are directly billed to the agency and are, therefore, tax exempt. If the 6th digit is 1,2,3 or 4, the card purchases are billed to the employee and not directly to the agency. Therefore, they are taxable.
  • Exceptions to the above: The Department of Interior uses integrated cards and the cards will appear to be directly billed (based on the 6th digit). However, the Department is directly billed for only purchasing and fleet card purchases. The employees are billed for travel purchases. An exception to the exception is the Bureau of Reclamation, which is part of the Department of Interior. All purchases are directly billed to the Bureau, including travel. When presented with an integrated card from the Department of Interior, request to see the employee's ID. If the employee is in the Bureau of Reclamation, the purchase, including travel, is exempt. If the employee is in any other agency within the Department of Interior, travel purchases will be taxable, but purchasing and Fleet purchases will be exempt.
  • GSA SmartPay matrix - this matrix will help guide you through the cards to determine if a transaction is subject to tax.

    Examples:
  • A federal government employee from the Department of Commerce presents a VISA card, with the GSA SmartPay logo on it, for payment of a hotel bill. The VISA card has a picture of an airplane on it. The card is a Travel Card which can be billed either to the employee or the agency. Therefore, the hotel must look at the 6th digit of the card number to determine where it will be billed. The 6th digit is a 3. Therefore, it will be billed to the employee, and the hotel must charge the accommodations tax.
  • A federal government employee from the Department of Defense presents a MasterCard, embossed with the GSA SmartPay logo, for payment of gasoline for their government vehicle. The MasterCard has a picture of two cars on it. The card is a Fleet Card which is always billed directly to the agency and is, therefore, tax exempt.
  • An employee from the City of Grand Junction presents a credit card for payment of a hotel bill. The card has the words "Purchasing Card" printed on the face of it. The words "Purchasing Card" on a VISA or MasterCard proves that it is a direct bill to the City of Grand Junction. Therefore, provided that the hotel stay was for business purposes, the charge would be exempt from accommodations tax.

To repair means to put back in good condition after damage or decay, to mend, to renew or restore. This differs from fabrication in that fabrication/manufacturing creates an original product, while repair work fixes the product when damaged or in the need of repair. The labor involved in repair is not subject to sales/use tax, but fabrication/manufacturing labor is taxable. (See: "Fabrication/Manufacturing Labor" for more details.)

A person performing repair services must collect sales tax on any tangible personal property that they sell. If the repair includes material parts, they must be separately stated on the invoice and tax must be collected; if not separately stated, the entire cost of the repair is subject to sales/use tax. If the repair is primarily labor and any materials used are insignificant to the repair and are not separately stated on the invoice, then the materials are taxable to the repair person and not to the customer.

Examples:

  1. A Boulder bar contracts with a craftsperson to custom build a bar. The total amount charged for the bar would be subject to sales/use tax, even if the labor is separately stated, because the labor is fabrication labor.
  2. A Boulder appliance store repairs appliances and has a customer bring in a vacuum for repair. The repair consisted of a new beater brush for $15.00, labor $25.00 and nuts, bolts and clips that are not itemized on the bill. The store must collect sales tax on the $15.00 for the beater brush because it is significant to the repair, but the miscellaneous parts and the labor are not subject to sales tax. The store did not sell the miscellaneous parts at retail, so the store must pay sales or use tax on these parts at the time they were purchased.

Sales/use tax applies to the sale of reproductions or copies of tangible personal property. Tax applies even when the original property that was reproduced or copied is exempt from tax, such as tangible personal property incidental to the performance of a service (See: "Service Enterprises"). Tax must be separately stated on the invoice or receipt. The one exception is for coin-operated photocopy machines. The tax may be included in the price of the copy and the owner of the machine is responsible for separating the tax and remitting it to the City.

Examples:

  1. A Boulder company hires an architectural firm to design a new building. The architect presents the company with blue prints and a 3-D model of the new building. The company requests an additional 3-D model. The original 3-D model is not subject to sales/use tax, because it was incidental to the performance of a service, but the second model (copy) is subject to sales/use tax.
  2. A Boulder printing company sells photocopies. Less than 50 copies are made by self-service, using the company's coin-operated copy machine, and for quantities of 50 or more, a company employee will make copies on a high speed copier. The price of the coin operated machine copies may include the sales tax, which the printing company must separate and remit to the City; but the company must charge sales tax directly to the customer on the full price of the copies from the high speed copier.

An asset sale of a business is subject to sales/use tax for the amount of the sales price allocated to the tangible personal property of the business. The tangible personal property includes, but is not limited to, machinery, equipment, furniture, fixtures, supplies and vehicles. Assets not subject to sales tax include, but are not limited to, goodwill, inventory and accounts receivable. If the sales contract does not allocate the sales price to particular asset groups, then a fair market value allocation or the book value of the assets in the accounting records of the purchaser may be used to calculate the sales tax due.

The new owner of the business, now owning the tangible personal property, is liable for any unpaid sales/use tax on this property. If sales tax is not collected on the sale of the business by the seller of the business, use tax must be paid by the purchaser.

The Boulder Revised Municipal Code excludes the following sales or changes in business from the definition of "Purchase" or "sale", and, therefore, they would not be subject to sales/use tax (section 3-1-1,"Purchase" or "sale", BRC, 1981):

  1. Division of partnership assets among partners according to their interests in the partnership;
  2. Transfer of assets of shareholders in the formation or dissolution of professional corporations;
  3. Dissolution and pro rata distribution of a corporation's assets to its stockholders;
  4. Transfer of a partnership interest;
  5. Transfer in a reorganization qualifying under Section 368(a)(1) of the federal internal revenue code, as amended;
  6. Formation of a partnership by a transfer of assets to the partnership or transfer to a partnership in exchange for a proportionate interest in the partnership;
  7. Repossession of personal property by a chattel mortgage holder or foreclosure by a lien holder;
  8. Transfer of assets from a parent corporation to a subsidiary corporation or corporation that are owned at least eighty percent by the parent corporation to a parent corporation or to another subsidiary that is owned a least eighty percent by the parent corporation, which transfer is solely in exchange for stock or securities of the subsidiary corporation
  9. Transfer of assets from a subsidiary corporation or corporations that are owned at least eighty percent by the parent corporation to a parent corporation or to another subsidiary that is owned at least eighty percent by the parent corporation, which transfer is solely in exchange for stock or securities of the parent corporation or the subsidiary which received the assets; and
  10. Transfer of assets between parent and closely held subsidiary corporations, or between subsidiary corporations closely held by the same parent corporation, or between corporations which are owned by the same shareholders in identical percentage of stock ownership amounts, computed on a share-by-share basis, when a tax imposed by this chapter was paid by the transferor corporation at the time it acquired such assets, except to the extent that there is an increase in the fair market value of such assets resulting from the manufacturing, fabricating or physical changing of the assets by the transferor corporation. To such extent, any transfer referred to in this subsection (k) shall constitute a sale. For the purposes of this subsection (k), a closely held subsidiary corporation is one in which the parent corporation owns stock possessing at least eighty percent of the total combined voting power of all classes of stock entitled to vote and owns at least eighty percent of the total number of shares of all other classes of stock.

Examples:

  1. A Boulder company is sold to another Boulder company for $250,000.00. The sales price allocation is as follows; $100,000.00 for equipment, $50,000.00 inventory, $25,000.00 furniture and fixtures, $25,000.00 account receivables, $50,000.00 goodwill. The selling company must collect sales tax for the amount of the sales price allocated to equipment and furniture and fixtures. The other assets are not subject to sales/use tax. If the selling company does not collect and remit the sales tax, the purchasing company must remit use tax.
  2. A California company purchases a Boulder company for $150,000.00. The seller did not collect sales tax, and the sales price was not allocated to asset groups in the sales contract. The purchaser's accounting records show $75,000.00 paid for equipment, $25,000.00 for furniture and fixtures, $20,000 for inventory, $10,000 for accounts receivable and $20,000.00 for good will. The purchasing company must remit use tax on the amount allocated in its accounting records for equipment and furniture and fixtures. The other assets are not subject to sales/use tax.

The Boulder Revised Code (Code) provides no exemption for the sale or purchase of tangible personal property to be used as samples, gifts, give-a-ways, demos or prototypes. Sales or use tax must be paid by the purchaser on the purchase price paid for gifts or give-a-ways, on the inventory cost of samples and demos and on the cost of materials used in prototypes. Inventory cost is the selling price less profit. This includes the cost of materials, overhead and labor used to produce the item.

The ultimate destination of the above does not affect the taxability. The Code states at subsection 3-2-1(b) that "The use tax is levied upon the privilege of persons in the City to use, store, or consume tangible personal property located in the city..." The taxable transaction is the purchase of the gift or give-a-way, the pulling from stock of samples and demos, the total capitalized cost of machinery, equipment or other tangible personal property used by the company that manufactures it, and the material charges of original research and development prototypes.

The giver of the gifts or give-a-ways is deemed to be the user and thus liable for the tax. Prototypes and research and development materials costs are taxable. Sales tax should be paid when materials are purchased or use tax must be remitted. If the prototypes are sold at a later date, this would be a separate transaction and would, therefore, be taxable at the sales price. Demos and samples used by salespeople are subject to use tax, at inventory cost, when pulled from inventory. If the demo or sample is later sold as used equipment, that would be a separate transaction and, therefore, taxable at the sales price.

Conditional sales contracts are taxable at the sale price. A conditional sale is a sale that has a trial period preceding the actual sale. If an inventory item is returned from a conditional sales contract and later sold as used equipment, the difference between the full sale price and the discounted used equipment price is subject to use tax to be paid by the seller of the equipment.

(The Code provides an exemption from use tax on motor vehicles used by auto dealers for demonstrations, see paragraph 3-2-2(a)(4), BRC, 1981)

Examples:

  1. A Boulder manufacturing company develops a new product and sends samples to all company sales representatives across the country to aid in selling the product. Use tax must be remitted to the City of Boulder at inventory cost for all the samples. The taxable transaction occurs when the items are pulled from inventory by the manufacturer for marketing use.
  2. A company in Boulder purchases calendars for all of its customers for holiday gifts. This is a taxable transaction. If purchased from a licensed Boulder vendor, the sales tax should be charged. If not, use tax must be remitted by the purchaser to the City of Boulder.
  3. A manufacturer in Boulder gives free display racks away when customers purchase a set amount of product. These display racks are taxable. Boulder sales tax is due when the racks are purchased. If not charged at that time, then use tax must be remitted to the City.
  4. An electronics manufacturer in Boulder sends out demos to trade shows. The taxable transaction occurs when the item is pulled from stock and used for marketing purposes as a demo. Use tax needs to be remitted to the City of Boulder. If this demo is sold at a later date, that would be a separate transaction, and, therefore, taxable at the sale price.
  5. A software company creates a prototype in its research and development department and sends it to a customer for testing. The customer later decides to purchase the software. All materials used for research and development are taxable when purchased by the software company. If Boulder sales tax was not collected, Boulder use tax must be remitted. The purchase of the software is a separate transaction and, therefore, taxable at the sales price.
  6. The same software company sells a software package to a customer on a conditional sales contract. The customer has a 90 day trial period prior to being charged for the software. The customer accepts the software and the sale is complete. Sales tax is charged on the purchase price only. No use tax is due for the 90 day trial period.
  7. A retail home fitness store sells a treadmill on a conditional sales contract. The store has a 30 day return policy. The customer decides that they do not want the treadmill and returns it within the 30 day period. Sales tax should be collected at the time of the sale and should be fully refunded when returned; no additional tax is due on this sale. The store later sells this treadmill as used equipment at a discounted price. Sales tax needs to be charged on the sales price and use tax needs to be remitted to the City of Boulder on the price difference between the original full sales price and the discounted amount.

Business engaged in rendering a service are generally consumers rather than sellers of tangible personal property. Tangible personal property which is incidentally transferred with the service to the customer is taxable to the service provider, not to the customer. Service businesses that also sell tangible personal property or taxable services must collect sales tax on these sales. If the charge for service is not separately stated from the charge for tangible personal property, the entire amount is subject to sales/use tax.

To determine if a transaction is a sale of tangible personal property or the transfer of tangible personal property incidental to the performance of a service, one must look to the true nature of the transaction. If the transaction is for advisory services, record keeping, payroll, architectural, tax and like services and the tangible personal property is forms, binders, blueprints, reports or other like property, the tangible personal property is incidental to the performance of the service and, therefore, taxable to the service provider, not the customer. If the purchaser's primary interest is in the physical property of the item purchased, the item is subject to sales/use tax when sold.

Copies sold of the tangible personal property incidental to the performance of a service are subject to sales/use tax. The transfer of the original manuscript by an author to the publisher for the purpose of publication is not subject to sales/use tax. However, the sale of printed copies of the author's book would be subject to sales/use tax.

Sales/use tax would apply to the sale of artistic expressions in the form of paintings, photographs, sculptures and similar artwork, even though the work of art may express an original idea. Generally custom-made items are subject to sales/use tax, with the exception of an original prototype. The materials used to make original prototypes are subject to sales/use tax. The purchaser's primary interest in custom-made items is in the physical property of the item being purchased. Therefore, they are taxable when sold.

The development of information in a research and development contract is not a sale of tangible personal property in the form of a prototype, model, plan, design or like items. Rather it is a contract for information which is an intangible service that cannot be conveyed orally and can only be conveyed via tangible personal property, which is incidental to the service. The materials used to make the prototypes, models, plans, design and like items are subject to sales/use tax to be paid by the service provider (see "Samples, Gifts, Give-a-Ways, demos, Prototypes and Conditional Sales" for detailed information). Any copies or additional prototypes and models would be subject to sales/use tax when sold.

When the transaction is determined to be the sale of tangible personal property, sales tax would apply to the full sale price for the item. Deductions are not allowed for labor, management, thought, time or other separately stated items.

Examples

  1. An architectural design firm contracts with a land developer to design a subdivision. The architect transfers blueprints and a 3-D model of the development. The developer requests two additional sets of blueprints and two additional models for his two partners. The original set of blueprints and 3-D model are not taxable to the developer, because they are incidental to the service; but the materials used to make them are taxable to the architect. The additional two sets of blueprints and models are taxable to the developer because they are copies.
  2. A law firm contracted with an artist to design and build a sculpture for the firm's lobby. The artist's invoice read: materials $500.00, design work $1,000.00 and labor $2,000.00. The entire invoice is subject to sales/use tax, even though it is separately stated. A deduction for labor and design is not allowed when the transaction is a sale of tangible personal property.

The Boulder Revised Code (Code) states at paragraph 3-2-2(a)(8) "A sales tax is due upon the purchase price paid for the transmission of intrastate electronic messages as defined in section 3-1-1, BRC, 1981."

The following lists specific services and their taxability:

Description

Tax Status

Comments

Regular Monthly Service

Taxable

Sometimes referred to in the industry as dial tone

Municipal Surcharge or Franchise Fee

Exempt

These are fees levied by the City against the phone company, not the customer. Part of monthly charge shown as a separate line item on the bill.

Local Usage Charge

Taxable

Metered service, in lieu of regular monthly service charge, customer is charged per call

Directory Assistance charge

Taxable

Taxed because electronic messaging is involved (see above Code section)

Interexchange Carrier charge

Taxable

Access charges for use of primary owner's infrastructure system by other phone service providers

Emergency 911 tax/fee

Exempt

This is a tax used to fund regional 911 service.

Telephone Relay Surcharge

Exempt

Local fee used to fund special services for the hearing impaired.

Voice/Text & all other messaging

Taxable

Unregulated service

Call Waiting

Taxable

Unregulated service

Intrastate Long Distance

Taxable

Calls originating in Boulder to other Colorado numbers

Interstate Long Distance

Exempt

Calls originating in Boulder to numbers outside the state of Colorado

Directory Charges

Exempt

Charges for listing in white or yellow pages, considered to be advertising

Other unregulated services

Taxable

Taxable if electronic messaging is involved. (see above Code section)

Universal Service Fund

Taxable

Charge is part of purchase price

Colorado Service Fund

Taxable

Charge is part of purchase price

VOIP

Taxable

Voice over internet protocol

Telecommunications originating within the City to another location within the State of Colorado (intrastate) are subject to Boulder sales/use tax. Telecommunications to locations outside the State of Colorado (interstate) are not taxable. The full price charged to a customer by a hotel/motel for use of a telecommunications system is subject to sales/use tax. (See: "Hotels and Motels" for detailed information.)

Determination of whether a service is taxable depends on whether electronic messaging is involved. Electronic messaging goes beyond the sound of someone's voice, fax machine or computer on line. Practically everything that happens in telecommunications involves some form of electronic messaging. For example, each time a key on a touch tone phone is pushed an electronic message is sent down the lines to a switch which records it and acts upon it as appropriate. Therefore, most charges for telecommunications are subject to Boulder sales/use tax.

Examples:

  1. A Boulder hotel charges a guest an additional 50 percent over the charge billed by its telecommunications service provider for interstate and intrastate calls. The hotel pays sales tax to its provider on the amount charged by the provider. The hotel must either charge its guest sales tax on the mark-up of 50 percent or remit use tax to the City on the mark-up.
  2. A telecommunications provider provides its Boulder customers with phone service both inside the State of Colorado (intrastate) and outside the State of Colorado (interstate). The provider must collect Boulder sales tax on calls originating within the City to locations within the State of Colorado, but not on calls to locations outside the State of Colorado.

Tools, jigs, dies, patterns or molds are used in the process of manufacturing or processing, but are not "actually transformed by the process of manufacture and become through the manufacturing process a necessary and recognizable ingredient and component of the finished product" (subsection 3-2-6(c), BRC, 1981). Therefore, they do not meet the exemption for resale and are subject to sales/use tax.

The sale by the manufacturer of tools, jigs, dies, patterns or molds to a customer for use in manufacturing or processing is a retail sale, and the manufacturer must collect and remit sales tax. The point of shipment or storage will determine which jurisdiction's tax is collected. If a Boulder manufacturer designs and builds a tool, jig, die, pattern or mold for a California company, to be used and stored in Boulder, to manufacture parts for the California company, the California company must pay Boulder sales tax on the charge for the tool, jig die, pattern or mold. Conversely, if a California manufacturer designs and builds a tool, jig, die, pattern or mold for a Boulder company, to be used and stored in California, to manufacture parts for the Boulder company, the Boulder company must pay California sales tax on the charge for the tool, jig, die, pattern or mold.

If after using the tool, jig, die, pattern or mold, the purchaser sells it, that would be another retail sale; and sales tax must be collected and remitted. The purchaser is not in the business of reselling tools, jigs, dies, patterns or molds. Therefore, both transactions are subject to sales tax.

Examples:

  1. A Boulder manufacturer of plastic injected molded parts contracts with a Boulder computer hardware manufacturer to design and manufacture a mold for parts for a computer terminal and also to produce the parts for the next two years. The mold will be used and stored in the Boulder manufacturing facility. The Boulder manufacturer must collect Boulder sales tax on the total cost of the mold. The manufactured parts will be exempt from sales tax because they meet the resale exemption for they will " become a necessary and recognizable ingredient and component of the finished product".
  2. After one year of the contract, the above manufacturer of computer hardware decides to have another Boulder plastic injected mold manufacturer produce the parts. Therefore, the original contract was cancelled The above contract stipulated that parts would be supplied for two years, and, if the contract was cancelled, there would be an additional $2,000.00 charge for the mold. The $2,000.00 charge would be subject to sales/use tax at the time of the cancellation, because discount on the mold provided by the contract was voided.
  3. A Boulder manufacturer contracts with a California manufacturer to design and manufacture a mold and produce parts for its research and development department. These parts will not be sold to customers. The mold will be used and stored in California. The cost of the mold would not be subject to Boulder sales/use tax, but the parts would be. The mold was not transferred to Boulder and would be subject to California sales tax, but the parts are being used in Boulder by the Boulder manufacturer.

"Use tax is levied upon the privilege of persons in the city to use, store, or consume tangible personal property located in the city and taxable services purchased or leased at retail and furnished within the city, whether purchased or leased inside or outside the city limits, and not subject to the sales tax imposed by this chapter. The use tax is remitted to the city by the person using, storing, or consuming the tangible personal property or taxable services. The use tax is a complement to the sales tax, and its purposes are to equalize competition between in-city and out-of-city vendors and lessors of tangible personal property and services and to eliminate incentives for city residents to leave the city to purchase or lease tangible personal property and taxable services" (3-2-1(b), BRC, 1981).

For information about how to remit Use tax see our website.

Use tax is paid by the purchaser when sales tax has not been charged and collected by the seller. There are various reasons why sales tax would not have been collected.

  • The purchase was shipped into the City, via common carrier, having been sold by an unlicensed vendor located outside the City. In this case there should not be any City tax charged, but State of Colorado, RTD, Cultural, Baseball and County taxes may be charged or a combination of these taxes may be charged.
  • A City of Boulder business purchased from a vendor located outside the City. The purchaser went to the vendor's location and picked up the purchase. In this case, depending on where the vendor is located, another city's tax may be charged, or, if the vendor is located in an unincorporated area, there would not be any city tax charged.
  • A City of Boulder business purchased items tax exempt for resale, but pulls some of the items from inventory to use in the operation of its own business.

Use tax due to the City of Boulder shall be reduced by the amount of sales or use tax legally paid to another Colorado municipality. This credit is not to exceed the amount of Boulder's sales/use tax as set forth in Section 3-2-5, "Rate of Tax," B.R.C. 1981.

When a Boulder business picks up a purchase in another city and pays the other city's sales tax, a credit is given for the amount of tax paid to the other city up to an amount equal to the Boulder use tax amount (see 3-2-8(b), BRC, 1981 for tax rate). If the Boulder tax rate is higher than the other city's tax rate, use tax is due on the difference. This is true for all legally imposed city tax collected on all purchases, with the exception of construction materials (see: "Construction and Contractors" for more detail).

Use tax due to the City of Boulder shall also be reduced by the amount of sales or use tax legally paid to other states based on the following formula. The tax rate legally paid to another state is first reduced by the State of Colorado tax rate, then by RTD and any additional state collected taxes subject to use tax and then by the City of Boulder tax rate. Any remaining tax due is due to the City of Boulder not to exceed the rate set forth in Section 3-2-5, "Rate of Tax", B.R.C. 1981. This is true for all legally imposed tax collected on all purchases, with the exception of construction materials (see: "Construction and Contractors" for more detail).

If a Boulder vendor picks up a purchase in another state and pays a legally imposed sales or use tax in that state in the amount of 5%, the credit is applied as follows:

Tax Description

Rate Adjustment

Percentage of tax paid

5.00%

State Tax

-2.90%

RTD + Cultural

- 1.10%

City of Boulder

-3.86%

Percentage of tax due to Boulder

-2.86%

The Boulder Revised Municipal Code states at Section 3-2-8(b)(1): "The city's use tax shall not apply to tangible personal property that was previously subjected to a sales or use tax of another municipality, organized and existing under the authority of the Constitution or laws of the State of Colorado, lawfully imposed on the purchaser or user, equal to or in excess of the rate set forth in Section 3-2-5, "Rate of Tax", B.R.C. 1981. A credit shall be granted against the city's use tax equal to the tax paid by reason of the imposition of a sales or use tax of the other municipality on the purchase or use of the property. The amount of the credit shall not exceed the rate set forth in Section 3-2-5, "Rate of Tax", B.R.C. 1981. The use tax credit set forth in this subsection shall not apply to a sales tax paid on construction materials."

Use tax would not apply as specified in B.R.C. section 3-2-6(u), which states: "All property and services whose sale, purchase, or use the city is prohibited from taxation by the laws or Constitution of the United States or the Constitution of the State of Colorado."

If a vendor located outside the City of Boulder ships purchased items into Boulder and charges another city's sales tax, the Boulder business should not pay the other city's sales tax. The Boulder business should pay the invoice less the illegally charged city sales tax and remit use tax to the City of Boulder. It is the responsibility of the Boulder business to make sure that the proper tax is being paid and that the vendor collecting any Boulder sales tax is properly licensed with the City.

Any leased equipment or materials being used in the City of Boulder are subject to Boulder's sales/use tax. If the leased item is picked up outside the City of Boulder, the first month's sales tax is due to the City where the item was picked up. All the remaining months sales/use tax would be paid to Boulder (See: "Leases & Rentals" for more detail).

Examples:

  1. A Boulder business purchases a piece of equipment from a Denver vendor. The vendor is not licensed to collect Boulder sales tax. The equipment is shipped via a trucking line arranged and paid for by the Denver business. The taxes charged on the invoice are State and RTD. The Boulder business must remit use tax to the City of Boulder
  2. The above business picks up the piece of equipment; instead of having it delivered, and is leasing it for 6 months, instead of purchasing it. The taxes that are charged on the first month's invoice are State, RTD and Denver. The Boulder business is given a credit for the legally imposed city tax paid equal to the amount that would be due to Boulder. Use tax is not due to Boulder because a city tax was paid in excess of the amount that would have been due to Boulder. Sales tax must be remitted to the City of Boulder for the remaining 5 months of the lease. If the Denver vendor is not licensed to collect Boulder sales tax, use tax must be remitted to Boulder by the Boulder business.
  3. An office supply store withdraws pens, copy paper and message pads from its inventory for use by its employees in the store. The supply store must remit use tax on the cost to the store of the supplies that it removes from inventory for its own use.

3-2-2 (a)(5) “A use tax is due upon tangible personal property that is utilized in the city if such use occurs within three years of the most recent sale of the property. No use tax shall be due on the use of tangible personal property within the city that occurs more than three years after the most recent sale of the property if, within three years following the date of such sale, the property has been significantly used within the State for the principal purpose for which it was purchased.”

The above Code section requires the City to collect use tax on all tangible personal property transferred into the City. This includes but is not limited to business assets transferred into the City by a business relocating in the City or assets transferred to a business currently located in the City from another business location outside the City.

The cost basis used to calculate the amount of tax due is as follows:

  • Assets that were last purchased within one year of the transfer to the City would be subject to the City’s use tax based on the purchase price of the asset.
  • Assets that were last purchased more than one year and less than three years prior to the transfer to the City would be subject to the City’s use tax based on either book value or fair market value (FMV), which ever is greater.
  • Assets that were last purchased more than three years prior to the transfer to the City would not be subject the City’s use tax provided that within the three years following the date of the last purchase, the property has been significantly used within the State for the principal purpose for which it was purchased.

Credit will be given for legally imposed tax that was paid for the assets in the prior jurisdiction based on the rate of tax paid in that jurisdiction and the basis for the tax would be the above. The credit will be applied as follows.

Tax Description

Rate Adjustment

Percentage of tax paid

5.00%

State Tax

-2.90%

RTD, Cultural & Stadium

- 1.20%

City of Boulder

-3.41%

Percentage of tax due to Boulder

-2.51%

Examples:

  1. A manufacturing company has two locations, one in Boulder and the other in unincorporated Boulder County . The company has decided to move one of its production lines from the Boulder County plant to the City of Boulder plant. The company will owe use tax on all of the assets transferred into the City that were last purchased within the last 3 years to support the production line based on either purchase price, book value or FMV determined by its last purchase date.
  2. A computer company has decided to relocate its operations to the City from another state where it had paid 5.00 percent sales tax on the purchase of its assets. Seventy percent (70 percent) of the assets were purchased within the last year, 20 percent were purchased more than one year and less than 3 years prior to the transfer to the City, and the remaining 10 percent were purchased over 3 years prior to the transfer to the City. The company would owe 2.51 percent (as shown above) tax on the purchase price of 70 percent of the assets purchased within the last year, the book or FMV which ever is greater of the 20 percent of assets purchased more than one year and less than three years prior to the transfer and no tax on the remaining 10 percent.

All veterinarians providing services in the City must be licensed with the City for sales/use tax. This includes mobile veterinarians coming into the City even though their office location is outside the City.

All sales made by a veterinarian are subject to sales/use tax; this includes but is not limited to the sale of pet food, supplies, supplements and prescription drugs. The service of providing health care for non-humans is not subject to tax.

Prescription drugs sold directly to a pet guardian by a veterinarian or pharmacy are subject to sales tax (see: Drugs for additional information). Prescription drugs are not taxable when sold directly to a veterinarian if the veterinarian will be reselling the drugs and collecting sales tax. Prescription drugs are taxable when sold directly to a veterinarian if the drug will be used in providing services.

The veterinarian has the choice of paying the sales tax or remitting use tax on drug purchases when the drugs will be used to perform a service. If the drug cost is insignificant to the cost of the service provided, the veterinarian may choose to pay the tax on the drug upon purchase and not charge tax on the charges to the guardian.

If tax is not charged on purchases of drugs used to provide services, supplies, food or any other purchases for use in the veterinarian's business and not for resale, the veterinarian must remit use tax to the City.

Examples:

  1. A dog is brought to a veterinarian's office for a shin infection and the guardian also requests the dog be vaccinated. The Vet cleans the wound and applies an antibiotic and gives the guardian a tube to apply at home. She also vaccinates the dog. The bill to the guardian lists vaccination $25.00, office visit $25.00 and antibiotic $15.00. Tax must be charged on the bill for the tube of antibiotics, but the tax on the vaccination and antibiotic used in the office can be paid by the veterinarian upon her purchase price since the cost of the vaccine and antibiotic used was insignificant to the charge for the service.
  2. A Boulder veterinarian purchases a computer and picks it up in Denver , office supplies at a store in Boulder and surgical supplies over the internet. The vet will need to remit use tax on the surgical supplies unless the vendor has a Boulder license and charged the correct sales tax. The vet would receive credit for the city tax paid to Denver on the computer because it was picked up in Denver.