Colo. Code Regs. 39-26-704-2

Current through Register Vol. 47, No. 11, June 10, 2024

Rule 39-26-704-2 - Sales Tax Exemption for Housing Authorities

Basis and Purpose. The bases for this rule are §§ 39-21-112(1), 39-26-704 (1.5), 29-4-227, 29-1-204.5, and 29-4-507, C.R.S. The purpose of this rule is to establish guidelines for the sales and use tax exemption authorized by § 39-26-704 (1.5), C.R.S., including the process for requesting exemption certificates and refunds for tax paid. To alleviate the administrative burden on housing authorities, an affidavit, as described in this rule, may be submitted in lieu of receipts for refund claims for state sales and use tax paid prior to September 30, 2016. Receipts are required for refunds of state sales and use tax paid after September 30, 2016 and for local sales tax paid after August 10, 2016. These refund claims requiring receipts are expected to be infrequent because, beginning August 10, 2016, exemption certificates will be available to prevent the payment of tax at the point of sale, thus reducing the burden on housing authorities. Receipts are required for refunds of all local sales taxes claimed because local sales taxes can often be exempted at the point of sale with a building permit, which would have been obtained for all projects prior to construction.

(1)General Rule.

(a)Exemption for Housing Authorities. All sales to and all storage, use, or consumption of tangible personal property or otherwise taxable services by Housing Authorities are exempt from state, local, and special district sales and use taxes.

(b)Exemption for Qualifying Projects. Beginning August 10, 2016, an exemption from state, local, and special district sales and use taxes is allowed to any Qualifying Entity for any Qualifying Project in the manner described in this rule. Only state sales and use taxes paid prior to August 10, 2016 are eligible to be refunded. Local sales and use taxes paid prior to August 10, 2016 are not eligible to be refunded. Eligible Qualifying Projects should obtain exemption certificates beginning August 10, 2016 in order to make purchases tax-free after that date. In the event, expected to be rare, that sales and use taxes are paid on or after August 10, 2016, refunds for all sales and use taxes paid will be made in accordance with subsection (3)(f) of this rule.

(2)Definitions.

(a) "Authority" or "Housing Authority" means:

(i) A city housing authority as defined in § 29-4-203(1), C.R.S., or

(ii) A multijurisdictional housing authority established under § 29-1-204.5, C.R.S., or

(iii) A county housing authority as defined in § 29-4-502(1), C.R.S.

(b) "Department" means the Department of Revenue.

(c) "Qualifying Entity" means an entity that is wholly or partially owned by:

(i) A Housing Authority, or

(ii) An entity that is wholly owned by a Housing Authority, or

(iii) An entity of which a Housing Authority is the sole member.

(d) "Qualifying Project" means a project, as defined in § 29-4-203(12), C.R.S., that is wholly owned by, leased to, or under construction by a Qualifying Entity. A Qualifying Project will involve capitalizable expenditures.

(3)Sales and Use Tax Exemption for Qualifying Projects.

(a) The exemption for Qualifying Projects under paragraph (b) of subsection (1) of this rule applies only to tangible personal property and otherwise taxable services purchased, acquired, stored, used, or consumed for Qualifying Projects during the construction period determined under paragraph (b) of this subsection (3).

(b)Determination of Construction Period. The exemption under paragraph (b) of subsection (1) of this rule applies only during the construction of a Qualifying Project. The Housing Authority shall determine and certify the beginning and ending dates for the construction of the Qualifying Project and the period of time defined thereby will be the construction period for the Qualifying Project.

(c)Determination of Low-Income Percentage. The exemption allowed under paragraph (b) of subsection (1) of this rule is in proportion to the percentage of the project that is for occupancy by persons of low income. The Housing Authority shall determine and certify this percentage and such determination shall be presumed valid absent manifest error.

(i) With respect to the definition of "low income" used in the determination made under this paragraph (c), no manifest error exists where a Qualifying Entity uses a definition established by the United States Department of Housing and Urban Development, the Colorado Housing and Finance Authority, or any similar public lender for Qualifying Projects.

(ii) With respect to the calculation of the percentage of the project that is for occupancy by persons of low income made under this paragraph (c), no manifest error exists where the calculation by the Qualifying Entity is consistent with any such calculation made in accordance with rules prescribed by the United States Department of Housing and Urban Development, the Colorado Housing and Finance Authority, or any similar public lender for Qualifying Projects.

(d)Application for Exemption for Qualifying Projects. Exemption certificates may be requested from the Department for any Qualifying Project to allow Qualifying Entities and contractors to make tax-free purchases for the Qualifying Project. The exemption certificate may be requested by the Qualifying Entity, the general contractor for the Qualifying Project, or both by completing and submitting the appropriate application. The application must be accompanied by a statement from the Housing Authority detailing the Authority's ownership interest in the Qualifying Entity, certifying the percentage calculated under paragraph (c) of this subsection (3), and certifying the construction period determined under paragraph (b) of this subsection (3).

(e)Remittance of Tax for Mixed Use Qualifying Projects. Qualifying Entities that own, lease, or construct Qualifying Projects for which an exemption certificate is issued under paragraph (d) of this subsection (3), and for which the percentage calculated under paragraph (c) of this subsection (3) is less than 100% periodically must file sales tax returns and remit payment of the sales tax for the percentage of the Qualifying Project that is not exempt.

(i) Except as provided in subparagraph (ii) of this paragraph (e), such filing and payment shall be made at least quarterly and shall be made in accordance with all rules governing the filing and payment of sales tax generally.

(ii) If the aggregate annual sales or use tax a Qualifying Entity must remit under this paragraph (e) is less than five thousand dollars, the Qualifying Entity may request from the executive director and the executive director may grant permission to file and remit sales tax under this paragraph (e) on an annual filing basis.

(f)Refund Claims for Qualifying Projects. A Qualifying Entity that owns, leases, or constructs a Qualifying Project may, subject to the percentage determined under paragraph (c) of this subsection (3), submit a refund claim for sales and use taxes paid.

(i) A refund claim for a Qualifying Project must be submitted by the Qualifying

Entity, not by a contractor performing work for the Qualifying Project.

(ii) Any refund claim submitted under this paragraph (f) must meet the following requirements:

(A) The refund claim must be submitted on the appropriate Departmental form ("Claim for Refund of Tax Paid to Vendors").

(B) The refund claim must be accompanied by a statement from the Housing Authority certifying:

(I) The Housing Authority's place in the ownership structure of the Qualifying Entity, and

(II) The percentage determined under paragraph (c) of this subsection (3).

(C) In the case of state sales or use taxes paid prior to September 30, 2016, the refund claim must be accompanied by an affidavit, signed under penalty of perjury by the Housing Authority, affirming that:

(I) The refund claim is for sales or use tax that actually was paid to vendors or was paid directly to the Department, and

(II) The amount of the claim includes only Colorado state sales or use tax and not any local or special district taxes.

(D) In the case of local and special district sales and use taxes paid on or after August 10, 2016 or state sales and use taxes paid on or after September 30, 2016, the refund claim must be accompanied by all necessary documentation, including receipts or invoices, required under Department rules, guidance, and instructions for refund claims generally.

39-26-704-2

37 CR 18, September 25, 2014, effective 10/15/2014

38 CR 02, January 25, 2015, effective 2/14/2015

39 CR 10, May 25, 2016, effective 6/14/2016

40 CR 12, June 25, 2017, effective 7/15/2017

40 CR 23, December 10, 2017, effective 1/1/2018

41 CR 13, July 10, 2018, effective 7/30/2018

41 CR 14, July 25, 2018, effective 8/14/2018

42 CR 02, January 25, 2019, effective 12/18/2018, expires 4/17/2019.

42 CR 02, January 25, 2019, effective 12/18/2018

42 CR 06, March 25, 2019, effective 4/14/2019

43 CR 04, February 25, 2020, effective 3/16/2020

43 CR 17, September 10, 2020, effective 9/30/2020

44 CR 01, January 10, 2021, effective 1/30/2021

44 CR 07, April 10, 2021, effective 4/30/2021

44 CR 08, April 25, 2021, effective 5/15/2021

45 CR 04, February 25, 2022, effective 3/17/2022

45 CR 23, December 10, 2022, effective 12/30/2022

46 CR 08, April 25, 2023, effective 5/15/2023