Sales Tax Obligations of Purchasers in Colorado

April 13, 2006

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Colorado imposes various requirements on purchasers doing business in Colorado. We recommend that you go through the items below to help you with the most frequently asked questions concerning purchasers and sales and use tax issues.

Tax exemption certificates. In Colorado there is no sales tax on articles sold to charitable organizations in the conduct of their regular charitable functions and activities. Colorado requires the following information to be submitted to the state to determine whether an organization qualifies for exemption:

a copy of the organization's federal exemption letter
the organization's financial statement showing the source of funds and its expenditures

Resale exemptions. When a purchaser states that a purchase is for resale, the seller must establish that the sale is tax-exempt and must keep records to that effect. It is the seller's responsibility to collect the tax unless the seller receives a satisfactory proof that the sale is exempt. Colorado requires exemption certificates, but does not prescribe the form of the certificates. As an alternative, Colorado also accepts the "multistate" exemption certificate that includes the following information:

the name and address of the purchaser
the name of the seller to whom it is given
a reason for the exemption
an authorized signature
the purchaser's license or registration number
the date
the good faith of the purchaser

Blanket resale certificate. The state of Colorado does not specifically address whether blanket certificates can be used for multiple purchases. A blanket certificate will relieve the burden of executing a separate certificate for each individual tax-exempt purchase as long as there is no significant change in the operations. A blanket certificate describes the general nature of the property purchased for resale and usually remains in force until revoked in writing.

As long as there is no prescribed form, if the seller has all the information that is required for a resale certificate, that should satisfy the Colorado Department of Revenue.

Purchases from out-of-state vendors. A use tax credit is allowed for sales or use taxes paid to another state that allows a similar credit for taxes paid to Colorado.