Sales Tax and Service-based Income in Colorado

Feb. 20, 2014

Often Colorado Companies wonder whether they need to collect (and then remit) sales tax for the services they provide. The simple answer, generally not.

1. Tangible Personal Property

   Sales tax is generally due on the sale of any "tangible personal property" (TPP). There is no sales or use tax due for services provided. "[I]f the real object sought by the buyer is the service per se, the transaction is not subject to tax even though some tangible personal property is transferred." CO Sales Tax FYI Publication 52.

2. Hypothetical

   For example, if you are a photographer hired to take photos at an event, the "real object sought" by the customer is the service of taking photographs, even though you later remit to the customer, as part of the service, hard copy photographs which are clearly tangible personal property. Therefore, there is no sales tax related to this transaction. However, if you charge separately for the prints resulting from your photography services, then the sale of the prints themselves are subject to sales tax in Colorado. 
3. Please note that this is not legal advice. Always consult an attorney with your legal matter. Contact West Venture Law with any legal questions: 303-408-4862