City and County of Denver, Colorado

TAX GUIDE

Topic No. 25

EXEMPT PURCHASES CONVERTED TO TAXABLE USE

 

Consumer use tax is imposed on purchases of tangible personal property (not including inventory) that are used, stored, consumed or distributed within the City of Denver on which no sales tax was paid at time of purchase. If any item which was originally purchased for resale is later withdrawn from inventory for use by a business or an individual, the cost of the item withdrawn is subject to use tax. If the item is withdrawn from inventory more than one year after its purchase date, the taxable amount is the item's fair market value.

 

Exempt entities using tangible personal property outside the normal course of their exempt activities are subject to Denver use tax.

 

EXAMPLE

 

XYZ Office Furniture has an executive chair in inventory. The president of the firm needs a new chair for his office. Because XYZ is a dealer in office chairs, they purchase them for resale, and thus tax free. The taxable incident occurs when the chair is withdrawn from inventory for use by the business. Use tax then becomes due on the cost, or fair market value if the chair was converted to business use more than one year after the purchase date.

 

 

 

* DRMC Section 53-95(17). Definitions.

* DRMC Section 53-96(1). Imposition of Tax.

 

 

 

THE ABOVE INFORMATION IS A SUMMARY IN LAYMAN'S TERMS OF THE RELEVANT DENVER TAX LAW FOR THIS INDUSTRY OR BUSINESS SEGMENT. IT IS NOT INTENDED FOR LEGAL PURPOSES TO BE SUBSTITUTED FOR THE FULL TEXT OF THE DRMC AND APPLICABLE RULES AND REGULATIONS.

 

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