Colorado Office of Economic Development and International Trade

Biotechnology Sales and Use Tax Refund

Colorado promotes its biotechnology industries by providing them with a taxpayer-friendly means to recover the sales and use taxes paid in the preceding year on equipment and supplies purchased to conduct biotechnology research and development. Qualified taxpayers may seek a refund every year for all Colorado sales and use taxes they paid on purchases of tangible personal property used directly and predominately in research and development of biotechnology. This includes property such as microscopes, chemical reagents, and software. The refund helps promote the biotechnology industry in the state, aiding both start-up and established companies.

Taxpayers have only a short period in which to claim the biotechnology refund or lose the opportunity to recover the preceding year's taxes. Taxpayers must submit a refund claim no sooner than January 1st and no later than April 1st of the following calendar year.

Requirements for the Refund

'The refund consists of the following six requirements, all of which must be satisfied for a taxpayer to qualify for the biotechnology refund:

  1. The refund applies to Colorado's 2.9 percent state sales or use taxes.
  2. The tax was paid within the eligible calendar year. The refund for biotechnology is not an exclusion or exemption from sales or use taxes. To take advantage of the refund, the taxpayer first must pay any sales or use taxes owed, then seek a refund.
  3. The tax was paid by a qualified taxpayer.
  4. The tax was paid in the calendar year immediately preceding the brief mandated filing period (that is, the period eligible for the refund).
  5. The tax was paid for the sale, storage, use, or consumption of (a) tangible personal property (b) for use in Colorado; and
  6. The tangible property was directly and predominately used in (a) research and development (as defined in the federal tax code) (b) of biotechnology.

The refund provision defines 'biotechnology' as the application of technologies to: (1) produce or modify products; (2) develop microorganisms for specific uses; (3) identify targets for small pharmaceutical development; or (4) transform biological systems into useful processes or products. The potential endpoint of the products, processes, microorganisms, or targets that result from the research and development is the improvement of human or animal health care.

Filing Procedures

Qualified taxpayers must submit a refund application to the Colorado Department of Revenue. The application must follow certain procedures:

  • It must be made no earlier than January 1st and no later than April 1st of the calendar year following the calendar year for which the refund is claimed.
  • It must be made on Colorado Form DR 0137, Claim for Refund .
  • It must include proof of payment of sales or use taxes, established by either vendor invoices or previously filed use-tax returns.
  • It must be accompanied by a detailed list in the form of a spreadsheet of all expenditures that support the claim for refund (and perhaps later supplemented by additional information that the CDOR requests).

To consult the Sales and Use Tax Refund for Biotechnology statute, go the the on-line state statutes, http://198.187.128.12/colorado/lpext.dll?f=templates&fn=fs-main.htm&2.0, and search for 39-26-401 and 402.