City and County of Denver, Colorado

TAX GUIDE

Topic No. 83

USE TAX

A tax is imposed upon the privilege of using, storing, distributing, or consuming within the City, tangible personal property and certain services purchased at retail, when there has been no previous payment of a legally imposed sales or use tax equal to or greater than the Denver rate.

The purpose of the use tax is to raise funds for the payment of expenses of operating and improving the City and its facilities and for the payment of the principal of and interest due upon any general obligation or special revenue bonds lawfully authorized and issued by and on behalf of the City; in accordance with this purpose, the proceeds of the tax shall be placed in the un-apportioned sales, use and lodger's tax account of the fund plan, DRMC § 20-18 , from which shall be allocated, apportioned and transferred as therein provided such sums to the respective funds and accounts of said fund plan as are therein indicated and for the purposes therein stated. Beginning January 1, 2007 and expiring December 31, 2016, the use tax increase approved by the voters on November 7, 2006 and as provided in DRMC § 53-98(k) or the "Denver preschool tax", is for the purpose of funding the Denver preschool program in order to increase access to and quality of preschool programs for Denver residents.

Retailer use tax is generally incurred when a non-resident vendor engages in business in the City by making retail sales and collects what would otherwise be termed sales tax from its Denver customers. Retailers use tax is the same as sales tax except that it generally results from a sale delivered into Denver by a vendor located outside the City. A vendor license is required. The fee for a two-year vendor license is $20.

Consumer use tax is imposed upon the use, storage, distribution, or consumption of taxable personal property and certain services purchased at retail within the City. When tangible personal property is first distributed, stored, used or consumed in the City more than one year after its retail sale, "purchase price" means its market value rather than the acquisition cost. A reduction to the amount of consumer use tax due may be allowed for a legally imposed sales tax paid to other taxing authorities for the same transaction.

However, certain tangible personal property, which has been owned and used for its intended purpose for more than one year before it is moved into Denver, is exempt from use tax. That exemption does not apply to: construction equipment, tools and machinery, construction building materials, and automotive vehicles. Consumer use tax is reported on Schedule B of the combined sales/use tax return. Use tax on special rate transactions is due at the special rates. There is no fee for a consumer use tax license.

Use tax license applications may be obtained from www.denvergov.org or the Taxpayer Service Unit of the Treasury Division at 720-865-7075.

EXAMPLE OF RETAILER USE TAX

BYN Corporation is located outside of Denver and makes retail sales into Denver. Since BYN Corporation has no Denver outlet, it would collect and remit retailer use tax on the purchase price.

EXAMPLES OF CONSUMER USE TAX

1. Flux-Air Corporation purchases coffee at a grocery store which did not collect any sales tax. The company is required to pay consumer use tax at the rate of 4.0%.

2. XYZ buys a new computer from an outlet in Chicago. The vendor does not collect any sales tax. XYZ must pay 3.62% consumer use tax on the purchase of this item. If the vendor had properly collected a State of Illinois and Chicago municipal tax, XYZ could be allowed a reduction to the use tax due to Denver.