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Colorado Sales Tax Rulings and Updates Roundup


The Colorado Department of Revenue stays busy. Recently, they published several letter rulings clarifying Colorado sales tax exemptions. 

Since lately Colorado exemptions seem to come up quite frequently, see if you can guess which way Colorado ruled in these cases before we give you the answers. Let's start with an easy one . . .

Case #1: Electronically Delivered Newspapers

The Facts:

  1. A company delivers newspapers electronically.
  2. Colorado "imposes sales or use tax on the sale, use, storage, or consumption of 'tangible personal property.'"
  3. Newspapers are considered tangible personal property, even if delivered electronically, unless they qualify as a "legal publication."
  4. The company's newspapers do not qualify as "legal publications."

So, the answer is . . .?

The electronic newspapers are subject to Colorado sales and use tax.

Case #2: Liquor-filled Candies

The Facts:

  1. A company has retail stores in Colorado that sell liquor-filled candies.
  2. Colorado exempts "food for domestic home consumption" from sales and use tax.
  3. Food products must qualify as "food" to be exempt.

Exempt or not exempt?

Liquor-filled candies do not qualify as food, and are therefore subject to sales and use tax.

Case #3: Nutritional Shakes

The Facts:

  1. A company sells four types of nutritional shakes: 1) a complete nutritional shake marketed as a meal, 2) a nutritional shake that supports a "particular nutritional need (immune health, bone health, etc), 3) a nutritional shake designed for people with diabetes and 4) a product that comes in both powder and liquid forms, marketed to athletes to "help build muscles and aid in muscle recovery."
  2. As noted above, Colorado exempts "food for domestic home consumption" from sales and use tax.
  3. Colorado follows the USDA definition of "food," which specifically excludes supplements from this definition.

What do you think? Exempt or not exempt?

The nutritional shakes are considered "food," and are therefore exempt from Colorado sales and use tax. Here's the twist: the USDA relies on the food labels required by the FDA to determine whether or not a a product is a supplement or a food. The products in question have "Nutrition Facts" labels, as opposed to "Supplement Facts" labels. Thus they qualify as "food."

So how did you do on the quiz? Keeping up with exemptions and sales tax rates can be downright taxing. Download a free Colorado sales tax rate table below, and go here for free rate tables for all 50 states.

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Avalara Author
Will Frei
Avalara Author Will Frei
Will Frei covers sales tax news including best practices, legislation and sales tax technology. He is the Social Media Manager at Avalara.