Sales Tax State Activity Update -October 2008

Refresh your view of those Colorado Rockies

While the Colorado Department of Revenue (DOR) did not specifically identify any changes to their treatment of contractors, they did publish a refresh of their guidelines for the Construction Industry. FYI – Sales 6 was released in July, 2008. The initial section provides definitions of what the DOR considers as construction contractors. The primary criteria define those persons that perform work on real property for another party pursuant to an agreement. Real property includes building and building components as well as improvements of land.

Contractors that use a Time and Materials billing method as well as Lump Sum Contracts should review the requirements for the application of sales tax on separately stated materials and supplies or the need to insure the accrual of use tax on materials that become part of the real property. A Retailer-Contractor can purchase building supplies and construction materials using a Sale for Resale Exemption Certificate if it is unknown at the time of purchase how the supplies or materials will be used. The key point to remember is that Retailer-Contractors have a higher burden of keeping good books and records for their different types of business. As well, the Retailer-Contractor must register for a sales tax license and submit periodic returns for their related retail activities.

When purchasing materials that will be installed at a construction site that is not in the same jurisdiction of the materials vendor, it may be beneficial to check with the jurisdiction authorities of the construction site regarding their requirements for local use taxes. While additional local use tax may be due, credit for sales tax already paid may be available.

Visit the Colorado Department of Revenue web site for additional details.

(State of Colorado Department of Revenue FYI: Contractors and Retailer-Contractors - - Definitions and Sales Tax Requirements Sales 6 issued July, 2008)

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