Energy used for industrial or related purposes
This page will be updated regularly as more details become available. Please check back often. These changes apply ONLY to Colorado state sales and use tax, not to any city, county or special district taxes. Also, please note that any information related to this topic found elsewhere on this Web site is in the revision process. Please be patient while we update the relevant documents and pages. The information on this page is current.
Effective March 1, 2010 through June 30, 2012 sales and purchases of electricity, coal, gas, fuel oil, steam, coke, or nuclear fuel used in processing, manufacturing, mining, refining, irrigation, construction, telegraph, telephone, and radio communication, street transportation services, and all industrial uses are not exempt from the 2.9 percent state sales and use tax. This effective date will impact the March 2010 period return due April 20, 2010.
Except:
- Fuel or energy used for agricultural purposes remains exempt from the 2.9 percent state sales and use taxes.
- Fuel or energy used for railroad transportation services remains exempt from the 2.9 percent state sales and use taxes.
- Fuel or energy used in the generation of electricity remains exempt from the 2.9 percent state sales and use taxes. However, fuel used to produce other energy that will later be used in the generation of electricity may be taxable. See example below.*
- Gas and electricity for residential use remains exempt.
- Gasoline and special fuel (diesel) that is subject to excise tax, even when excise tax is refunded, remains exempt.
*Example: Company A purchases coal to produce steam. Company A sells the steam to Company B, Company B then uses the steam in the generation of electricity. The coal that Company A purchased to produce the steam IS subject to tax, the steam that company B purchased from Company A to generate electricity is NOT subject to tax. However, if company B purchases coal to produce the steam, in house, then is used the generation of electricity, the coal would not be subject to tax.
Gas and electricity used in the processing of food, restaurants, is NO longer exempt from state sales tax.
Please see the publication Colorado Sales and Use Tax Rates (DR 1002) to determine if energy used in industrial and other related purposes is subject or exempt from state-collected city, county and special district taxes.
Who is responsible for collecting and remitting the tax? Any entity that provides any of the energy items listed above is responsible charging and remitting the sales tax on those energy items. If a consumer or end user receives any of the energy items listed above that did not contain the sales tax, that consumer must remit the use tax on those items.
How to account for this change on the sales tax return: Sales of the energy items listed above should be included on line 1, Gross Sales and Services, of the Colorado Retail Sales Tax Return (DR 0100) or Online Sales Tax Filing for businesses with only one location. These items can no longer be included on the deductions on 2b (line 7) of the return. An energy utility whose billing cycle includes exempt sales before and taxable sales after March 1 may prorate or use any other reasonable method to calculate the tax for such periods. Other reasonable methods include:
- Apply the sales tax to any billing cycle that begins during the March 1, 2010 to June 30, 2012 period.
- apply the sales tax to any billing cycle that ends during the March 1, 2010 to June 30, 2012 period.
Gas and electricity used in the processing of food is NO longer exempt from state sales tax. The deduction for Retail Food Establishments, filed on form DR 1465, is no longer allowable for the periods listed above.
Gas and electricity for commercial use IS exempt for some state-collected cities, counties or special districts and MAY be deducted on line 3b (line 3) of the return. Please see the publication Colorado Sales/Use Tax Rates (DR 1002) to determine which cities, counties or special districts exempt these items.
To view a copy of the legislation, see House Bill 2010-1190.