September 21, 2014

Colorado Supreme Court: Electricity is a Service, Not Tangible Personal Property, so No Tax Exemption Available

The Colorado Supreme Court issued its opinion in Department of Revenue v. Public Service Company of Colorado on Monday, June 30, 2014.

Taxation—Sales Tax—Statutes—Construction.

The Colorado Department of Revenue petitioned for certiorari review of the court of appeals’ decision affirming respondent’s entitlement to a sales and use tax refund. The Supreme Court granted certiorari and now reversed.

Respondent Public Service Co. claimed that it is entitled to a sales and use tax refund for sales and use taxes paid on machinery purchased for the generation of electricity. CRS §§ 39-26-709 and 39-30-106 provide a sales and use tax exemption for machinery used for the production of tangible personal property. Public Service Co. argued that electricity constitutes tangible personal property and that it therefore is entitled to the sales and use tax exemption for its machinery used in the production of electricity.

The Court held that electricity is treated as a service, not as tangible personal property, under the sales and use tax statutes. Therefore, Public Service Co. is not entitled to the machinery tax exemption.

Summary and full case available here.

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