Consumer's Use Tax Frequently Asked Questions

  1. What is a use tax? 
  2. What is subject to Denver use tax?
  3. What are the Denver sales/use tax rates?
  4. When is a Denver consumer’s use tax registration required?
  5. When is a Denver retailer’s use tax license required?

What is a use tax?
There are two types of use tax:  Consumer’s and Retailer’s.
Consumer’s use tax is a complement to sales tax that is due when Denver sales tax was not collected on a retail purchase of taxable personal property and certain services that are used, stored, distributed, or consumed in Denver .  Its purpose is to provide an even playing field between Denver businesses, which must collect Denver sales tax, and their out-of-Denver competitors.
 
Example 1:  Tangible property that is used, stored, distributed, or consumed in Denver that was purchased from an out-of-Denver vendor that collected Colorado State sales tax but no city sales tax is subject to Denver use tax at the full Denver tax rate.
 
Example 2:  Tangible property that is picked up in another Colorado city, which collects both the State and that city’s sales tax, which is subsequently used, stored, distributed, or consumed in Denver , is subject to Denver use tax unless the tax rate charged by the vendor is equal to or greater than the full tax rate in Denver (generally 7.72% effective 01/01/2007).
 
Example 3:  Tangible property originally purchased for resale by a business in Denver that subsequently uses, stores, distributes, or consumes that property in Denver , instead of reselling it, is subject to Denver use tax. 
 
Consumer’s use tax is reported on schedule B on the back of the combined Denver sales/use tax return and on line 10 on the front.
 
Retailer’s use tax is the equivalent of sales tax that is collected and remitted by a business located outside Denver that engages in business in Denver .  It follows sales tax rules, is collected as sales tax, and uses sales tax returns to report and remit the tax.
 
Retail vendors located outside Denver that do business in Denver are required to collect and remit retailer’s use tax.  Some out-of-Denver vendors, that are not required to collect Denver tax, voluntarily license to collect Denver tax as a service to their Denver customers.  (By collecting retailer’s use tax on taxable sales, they relieve their customers from having to accrue and remit consumer’s use tax on those purchases).
 
What is subject to Denver use tax?
Consumer’s use tax is imposed on the privilege of using, storing, distributing, or consuming taxable tangible personal property or services, purchased at retail, within Denver when a legally imposed sales/use tax equal to or greater than the combined Denver/State sales tax rate (generally 7.72% effective 01/01/2007), has not been paid at the time of purchase.
Retailer’s use tax is imposed on the same transactions that would require Denver sales tax if the vendor were located in Denver .

 

What are the Denver sales/use tax rates?

 

Sales/Use Tax Rates (Effective 1/1/2007)

Sales, rental or lease of tangible personal property  3.62%
 Exceptions
 Short term car rentals  7.25%
 Food, beverage and liquor sales  4.0%
 Aviation fuel  $.04 per gallon

 


When is a Denver consumer’s use tax registration required?
A business that has a Denver sales tax license automatically also has a Denver consumer’s use tax registration.  The Denver consumer’s use tax is reported with sales tax on the combined Denver sales/use tax return.
A business that does not require a Denver sales tax license needs a Denver consumer use tax account if it uses, stores, distributes, or consumes tangible personal property within Denver that has been purchased at retail.

Example:  A new business in Denver only performs non-taxable services.  Even though the business does not purchase inventory for resale, it would need a Denver use tax account if it purchases equipment or supplies from vendors outside Denver , or leases a vehicle from a lesser that does not collect sales.

 

When is a Denver retailer’s use tax license required?
A retail vendor located outside Denver is required to obtain a Denver retailer’s use tax license when it: 
- Leases tangible personal property that is located in Denver
- Has employees in Denver (i.e. performing repairs or installations in Denver )
- Has sales personnel in Denver soliciting orders
- Makes other solicitations in Denver, either by direct or indirect representatives, distributions of catalogs or other advertising, or by the use of other advertising media that is directed to the residents of Denver

 

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