DOR Taxation web site


Contractor and Subcontractor


Contractors and subcontractors performing only lump-sum contracts should not obtain Colorado sales tax licenses. They must pay all applicable Colorado sales and use taxes on all purchases of building supplies, construction materials and all other tangible personal property.  The only non-taxable purchases of building materials a contractor may make are those for construction work for tax-exempt organizations.


All supplies and materials are taxable on the contractor's cost, either through sales tax paid to the vendor or use tax paid by the Consumer Use Tax Return (DR 0252).   The contractor is also liable for sales/use tax on the cost of all supplies not becoming part of real property, as well as on all tools and equipment.  Local use taxes (city and county) are paid in conjunction with building permits. A contractor cannot treat this type of contract as time and materials for sales tax purposes.


The contractor who invoices separately for labor and materials must have a sales tax license. The contractor must charge applicable taxes on the marked up billing price of all materials. The contractor is liable for use tax on the cost of all supplies not separately billed to the customer, as well as on tools and equipment.  A time and materials agreement cannot be treated as a lump-sum contract for sales/use tax purposes.




If you are a retailer-contractor you must open and maintain a Colorado sales tax account.  You will be sent a sales tax license, which enables you to purchase tax free items for resale to retail customers. Like all other retail vendors, you must collect and remit to the Colorado Department of Revenue all state and state-administered local sales taxes on all retail sales. You will receive sales tax returns for this purpose.