colarado tax data

colarado-tax-data

In general, leases of tangible personal property are
considered retail sales and are subject to Colorado
sales tax. However, a lease for a term of 36 months or
less is tax-exempt if the lessor has paid Colorado sales
or use tax on the acquisition of the leased property. A
lessor may request permission from the Department to
acquire tangible personal property tax-free on the
condition that the lessor agrees to collect sales tax on
all lease payments received on the property.
A contract pursuant to which a contractor performs a
service for a customer using equipment owned by the
contractor is not considered a lease of the equipment
by the customer and is not subject to the tax
requirements discussed in this publication.
This publication is designed to provide general guidance
regarding the tax treatment of leases. Nothing in this
publication modifies or is intended to modify Colorado’s
statutes and regulations authorizing these exemptions.
Taxpayers are encouraged to consult their tax advisors
for guidance regarding specific situations.
The information in this publication applies to state and
local sales and use taxes administered by the
Department, but not to any sales or use taxes that the
Department does not administer for any home-rule
cities. Please contact any applicable home-rule city
directly for information about their sales and use taxes.


Effect of lease duration
The tax treatment of lease payments is determined, in
part, by the duration of the lease.
Leases greater than 36 months
If a lease is for a term of greater than 36 months, the
lessor must collect all state and state-administered
local sales taxes from the lessee on all payments made
pursuant to the lease. The lessor’s acquisition of the
property is considered a wholesale sale and is not
subject to sales or use tax.

Leases of 36 months or less
If the lease term is 36 months or less, the lessor must
pay sales and/or use taxes, as applicable, on the full
purchase price the lessor paid for the acquisition of the
property, unless the lessor has received permission
from the Department to collect all applicable state and
state-administered local sales taxes on all payments
made by the lessee pursuant to the lease. The lessor
may request such permission from the Department by
filing the Lessor Registration for Sales Tax Collection
(DR 0440). The permission to collect sales tax on lease
payments, if granted by the Department, obligates the
lessor to collect sales tax on all leases made by the
lessor for terms of 36 months or less.
The lessor must apply for a sales tax license and for
permission to collect sales tax prior to acquiring the
tangible personal property that is to be leased. A lessor
who has received permission from the Department to
collect sales tax on leases of 36 months or less will owe
no sales or use tax on the acquisition of tangible
personal property for lease.
If the lessor has not received permission to collect tax
prior to the acquisition of any property that will be
leased for a term of 36 months or less, the lessor must
pay sales tax to the seller at the time of acquisition
and any applicable use tax if the seller does not collect
sales tax. If immediately thereafter the lessor obtains a
license and files a DR 0440, the lessor may apply for a
refund of sales and/or use tax paid for the lessor’s
acquisition of the property.


Taxable charges
In general, all payments made pursuant to a lease
contract, including any associated charges, are subject
to sales tax. See Part 3: Calculation of Tax in the
Colorado Sales Tax Guide for additional information.
If a lessor’s lease transactions consist of the supplying
of both tangible personal property and maintenance
services for such property, the lessor may request
permission from the Department to collect sales tax
only on that percentage of the full contract price
attributable to the lease of the tangible personal
property under the contract.
Lessor registration requirements
Any lessor that will be collecting sales tax must apply
for and maintain an active sales tax license and submit
a completed Lessor Registration for Sales Tax
Collection (DR 0440). The lessor must submit with their
completed DR 0440 an attachment listing the
location/jurisdiction codes for each jurisdiction for
which the lessor will be collecting sales tax. See
Location/Jurisdiction Codes for Sales Tax Filing (DR
0800), and Colorado.gov/tax/sales-tax-license for
additional information.
Motor vehicle leases
See Sales & Use Tax Topics: Motor Vehicle for rules and
guidance specific to motor vehicle leases.

Sourcing lease payments
Lease payments are subject to Colorado sales tax if
they are sourced to Colorado under Colorado law.
These sourcing rules also determine the applicability of
any state-administered local sales taxes.
1) In general, periodic lease payments are sourced to
the primary property location for each period
covered by the payment. The primary property
location is generally the address for the property
provided by the lessee to the lessor.
2) If the leased property is not a motor vehicle,
trailer, semi-trailer, or aircraft, the first periodic
payment is sourced to the location at which the
lessee takes possession of the leased property,
either at the lessor’s business location or at
another location.
3) For a lease or rental that does not require
recurring periodic payments, the payment is
sourced to the location at which the lessee takes
possession of the leased property, either at the
lessor’s business location or at another location.
4) The preceding sourcing rules do not generally
apply to trains, trucks, buses, or aircraft used to
transport people or property in interstate
commerce.
If the primary property location for the leased property
changes during the lease term, the state and stateadministered local sales taxes due on subsequent lease
payments will be based upon the new location for the
property. See Proposed Rule 39-26-104-2(6) for lease or
rental agreements executed prior to June 1, 2019.
See section 39-26-104(3)(b), C.R.S., for additional
information about sourcing lease payments.

Additional resources

The following is a list of statutes, regulations, forms,
and guidance pertaining to sales tax on leases. This list
is not, and is not intended to be, an exhaustive list of
authorities that govern the tax treatment of every
situation. Individuals and businesses with specific
questions should consult their tax advisors.
Statutes and regulations
 § 39-26-102, C.R.S. Definitions.
 § 39-26-103, C.R.S. Licenses.
 § 39-26-104, C.R.S. Property and services taxed.
 § 39-26-113, C.R.S. Collection of sales tax – motor
vehicles.
 § 39-26-208, C.R.S. Collection of use tax – motor
vehicles.
 § 39-26-713, C.R.S. Tangible personal property.
 Rule 39-26-102(9). Retail sales.
 Rule 39-26-102(10).
 Rule 39-26-102(19).
 Rule 39-26-713-1.
Forms and guidance
 Colorado.gov/Tax
 Colorado.gov/tax/sales-use-tax
 Tax Statement for Leased Motor Vehicle (DR 0026)
 Lessor Registration for Sales Tax Collection (DR 0440)
 Location/Juris. Codes for Sales Tax Filing (DR 0800)