TR 43: Use Tax

"Use tax is levied upon the privilege of persons in the city to use, store, or consume tangible personal property located in the city and taxable services purchased or leased at retail and furnished within the city, whether purchased or leased inside or outside the city limits, and not subject to the sales tax imposed by this chapter. The use tax is remitted to the city by the person using, storing, or consuming the tangible personal property or taxable services. The use tax is a complement to the sales tax, and its purposes are to equalize competition between in-city and out-of-city vendors and lessors of tangible personal property and services and to eliminate incentives for city residents to leave the city to purchase or lease tangible personal property and taxable services"( 3-2-1(b), BRC, 1981).

Use tax is paid by the purchaser when sales tax has not been charged and collected by the seller. There are various reasons why sales tax would not have been collected.

• The purchase was shipped into the City, via common carrier, having been sold by an unlicensed vendor located outside the City. In this case there should not be any City tax charged, but State of Colorado, RTD, Cultural, Baseball and County taxes may be charged or a combination of these taxes may be charged.
• A City of Boulder business purchased from a vendor located outside the City. The purchaser went to the vendor's location and picked up the purchase. In this case, depending on where the vendor is located, another city's tax may be charged, or, if the vendor is located in an unincorporated area, there would not be any city tax charged.
• A City of Boulder business purchased items tax exempt for resale, but pulls some of the items from inventory to use in the operation of its own business.

Use tax due to the City of Boulder shall be reduced by the amount of sales or use tax legally paid to another Colorado municipality. This credit is not to exceed the amount of Boulder's sales/use tax as set forth in Section 3-2-5, "Rate of Tax," B.R.C. 1981.

When a Boulder business picks up a purchase in another city and pays the other city's sales tax, a credit is given for the amount of tax paid to the other city up to an amount equal to the Boulder use tax amount (see 3-2-5(a), BRC, 1981 for tax rate). If the Boulder tax rate is higher than the other city's tax rate, use tax is due on the difference. This is true for all legally imposed city tax collected on all purchases, with the exception of construction materials (see TR13: "Construction and Contractors" for more detail).

Use tax due to the City of Boulder shall also be reduced by the amount of sales or use tax legally paid to other states based on the following formula. The tax rate legally paid to another state is first reduced by the State of Colorado tax rate, then by RTD and any additional state collected taxes subject to use tax and then by the City of Boulder tax rate. Any remaining tax due is due to the City of Boulder not to exceed the rate set forth in Section 3-2-5, "Rate of Tax", B.R.C. 1981. This is true for all legally imposed tax collected on all purchases, with the exception of construction materials (see TR13: "Construction and Contractors" for more detail).

If a Boulder vendor picks up a purchase in another state and pays a legally imposed sales or use tax in that state in the amount of 5%, the credit is applied as follows:

The Boulder Revised Municipal Code states at Section 3-2-9(b): "The city's use tax shall not apply to tangible personal property that was previously subjected to a sales or use tax of another municipality, organized and existing under the authority of the Constitution or laws of the State of Colorado, lawfully imposed on the purchaser or user, equal to or in excess of the rate set forth in Section 3-2-5, "Rate of Tax", B.R.C. 1981. A credit shall be granted against the city's use tax equal to the tax paid by reason of the imposition of a sales or use tax of the other municipality on the purchase or use of the property. The amount of the credit shall not exceed the rate set forth in Section 3-2-5, "Rate of Tax", B.R.C. 1981. The use tax credit set forth in this subsection shall not apply to a sales tax paid on construction materials."

Use tax would not apply as specified in B.R.C. section 3-2-6(u), which states: "All property and services whose sale, purchase, or use the city is prohibited from taxation by the laws or Constitution of the United States or the Constitution of the State of Colorado."

If a vendor located outside the City of Boulder ships purchased items into Boulder and charges another city's sales tax, the Boulder business should not pay the other city's sales tax. The Boulder business should pay the invoice less the illegally charged city sales tax and remit use tax to the City of Boulder. It is the responsibility of the Boulder business to make sure that the proper tax is being paid and that the vendor collecting any Boulder sales tax is properly licensed with the City.

Any leased equipment or materials being used in the City of Boulder are subject to Boulder's sales/use tax. If the leased item is picked up outside the City of Boulder, the first month's sales tax is due to the City where the item was picked up. All the remaining months sales/use tax would be paid to Boulder (See TR24: "Leases & Rentals" for more detail).

Examples:

1. A Boulder business purchases a piece of equipment from a Denver vendor. The vendor is not licensed to collect Boulder sales tax. The equipment is shipped via a trucking line arranged and paid for by the Denver business. The taxes charged on the invoice are State and RTD. The Boulder business must remit use tax to the City of Boulder
2. The above business picks up the piece of equipment; instead of having it delivered, and is leasing it for 6 months, instead of purchasing it. The taxes that are charged on the first month's invoice are State, RTD and Denver. The Boulder business is given a credit for the legally imposed city tax paid equal to the amount that would be due to Boulder. Use tax is not due to Boulder because a city tax was paid in excess of the amount that would have been due to Boulder. Sales tax must be remitted to the City of Boulder for the remaining 5 months of the lease. If the Denver vendor is not licensed to collect Boulder sales tax, use tax must be remitted to Boulder by the Boulder business.
3. An office supply store withdraws pens, copy paper and message pads from its inventory for use by its employees in the store. The supply store must remit use tax on the cost to the store of the supplies that it removes from inventory for its own use.

Last Updated on Thursday, 14 March 2013 11:50