United States

Colorado: Department Revising Its Position on the Imposition of Local Sales Taxes on Leased Tangible Personal Property

Feb 16, 2015
From KPMG TaxWatch

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The Colorado Department of Revenue (Department) recently issued guidance advising taxpayers that it has changed its policy as to when lessors of tangible personal property need to collect and remit local sales taxes. In previously issued guidance (FYI Sales 56 Jan. 1, 2012), the Department took the position that lessors of tangible personal property were only required to collect local taxes if the lessor had physical presence nexus (i.e., a business location or employees) in the jurisdiction where the leased property was located. In other words, the Department’s view was that the presence of the leased property itself did not create local sales and use tax nexus for the lessor. 

Over time, the Department has revised its view to be more consistent with both Colorado case law and the policies of other states. Under its new policy, which was recently posted to the Department’s Web site, owning leased property in a jurisdiction will be sufficient to create nexus for the lessor with the local jurisdiction. The lessor, the Department noted in a General Information Letter issued last year, typically retains property rights and title to the leased property and is generally responsible for maintaining and repairing such property. As such, the continuous presence of leased property in a local jurisdiction is sufficient to create nexus. The Department is applying its new policy prospectively only to leases made or renewed on or after July 1, 2015.  Thus, lessors of tangible personal property will be required to obtain a sales tax license and collect local sales tax based on the location of the delivery, use or storage of the leased tangible personal property. Please contact Steve Metz (303) 382-7177 with more questions on Notice: Local Tax Jurisdiction Nexus for Lease Property.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.