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Colorado Judge: Use Tax Applies to Software Services

  • Sep 18, 2012 | Gail Cole

A recent ruling in Colorado impacts the use tax of software and online databases. The Colorado Court of Appeals reversed a judgment and remanded with directions the case of Ball Aerospace & Technologies Corporation v. City of Boulder. The decision was announced September 13, 2012.

An earlier summary judgment ruled that the company did not owe use tax on “its acquisition of downloaded computer software and access to online data services.” During the appeal, it was determined  “the trial court erred in determining that the transactions at issue were not taxable.”


At issue are two types of software:

1. Downloaded Software: software “that Company downloaded over the Internet.”

2. Online Databases: including but not limited to “(1) technical journal articles, conference materials, and papers; (2) federal government contract opportunities and market analysis; and (3) medical hazard and risk reference information to which Company purchased access (online data services).”

City Use Tax

"Use tax is supplementary to, rather than separate from, a sales tax" (Conoco Inc. v. Tinklenberg, Colo. App. 2005). "[W]hile sales tax is levied on a purchase, use tax is levied on the privilege of storing, using, or consuming tangible personal property purchased at retail." The court stated that they saw "...no reason why the same principles should not apply to the use of taxable services purchased at retail."

Section 3-2-2 of Boulder’s Revised Code states “there is hereby levied and there shall be collected and paid a sales or use tax on the full purchase price paid or charged for tangible personal property and taxable services purchased or sold at retail….” The code specifies that “computer software is subject to taxation under the sales and use tax chapter of the City Code.”

City Code § 3-1-1 “levies the use tax on computer software

(1) leased or purchased at retail,

(2) contained on an enumerated from or other machine-readable or human-readable form, and 

(3) over which the buyer has any right, power, dominion, or control.”

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.