Use Tax

The Arvada Municipal Code imposes a use tax upon the privilege of using, storing, distributing, or otherwise consuming tangible personal property in the City. If Arvada sales tax is not paid to a vendor licensed and authorized to collect the same at the time of purchase, then a use tax must be remitted directly to the City. Credit may be taken against Arvada's use tax for legally-imposed sales or use taxes paid to other municipalities. Such credit may not exceed the Arvada use tax due.

Use tax is complimentary to sales tax, but is paid directly to the City rather than to a vendor collecting on behalf of the City. All Arvada taxpayers must pay sales or use tax on purchases of tangible personal property that are not purchased for resale. Service businesses will likely have a use tax liability even if they do not sell anything. For online reporting, the Amount Subject to Use Tax is reported on the form, and the use tax will be calculated on the next line.

Use Tax is Transactional

When tangible personal property is first used, consumed, stored, or distributed in the City by the present owner, a use tax may be due. While credit is allowed for legally-imposed sales and uses tax previously paid, this credit only applies to taxes paid by the current owner. A previous owner's payment of sales/use tax does not apply. For businesses that were based outside the City and relocate to Arvada, an exemption exists for tangible personal property, other than construction materials and construction equipment, which was used outside the City for its intended purposes prior to being relocated to the City. This exemption does not apply to taxpayers with multiple locations who transfer equipment from a location outside the City to an existing location within the City.

Identifying Use Tax Liabilities

If a purchase of tangible personal property does not include a charge for municipal sales tax, then a use tax is due. Many vendors, being licensed with the Colorado Department of Revenue and other taxing authorities in the State, will collect some tax on a taxable purchase. Also, Colorado is a "point of delivery" sourcing state. This means that the point where delivery of the property occurs is the point of taxability. Some retailers erroneously collect the wrong tax, either because they are unsure of which jurisdiction an address resides in, or because they are incorrectly collecting tax based on the point of sale. For this reason, special attention should be given to the rate of tax collected because the payment of some sales tax may not eliminate or even reduce the Arvada use tax liability. Each purchase should be carefully examined to ensure that a sufficient, legally-imposed sales or use tax has been paid.

Use tax is levied upon not only the privilege of use or consumption but of storage or distribution in the City as well. If a taxpayer exercises dominion or control over the property for any length of time in the City, a taxable event has occurred. This distinction is important for taxpayers located in multiple jurisdictions that receive their purchases in Arvada and subsequently distribute them to other locations.

Retail businesses may have a use tax liability resulting from the removal of inventory which was originally purchased for resale. This can result from the removal of supplies or equipment for internal use, giveaway or complimentary items or meals, or the use of construction materials in lump-sum jobs.

Initial Use Tax Return

Because a significant amount of use tax generally results from the startup, purchase, or relocation of a business in the City, an Initial Use Tax (IUT) form is required whenever a business is purchased or established in the City. New or relocated businesses will have approximately 30 days to file the IUT from the business start date.

  • Storage means any keeping or retention of, or exercise of dominion or control over, or possession of, for any length of time, tangible personal property not while in transit but on a standstill basis for future use when leased, rented, or purchased at retail from sources either within or without the city from any person or vendor.
  • Use means the exercise, for any length of time by any person within the city of any right, power, or dominion over tangible personal property or services when rented, leased, or purchased at retail from sources either within or without the city from any person or vendor or used in the performance of a contract in the city whether such tangible personal property is owned or not owned by the taxpayer. Use also includes the withdrawal of items from inventory for consumption.
  • Consumer means any person in the city who purchases, uses, stores, distributes, or otherwise consumes tangible personal property or taxable services, purchased from sources inside or outside the city.

Example

  • Flux-Air Corporation purchases office supplies from an out-of-state vendor which does not collect any sales tax. The company is required to pay use tax at the rate of 3.46% on the purchase price and any shipping and handling charges.
  • XYZ buys a new computer from an outlet located in Lakewood. The vendor collects Lakewood sales tax which is 3%. XYZ Company is required to pay use tax on the purchase price of the computer of the incremental difference in the sale tax rates at 46% (3.46% − 3%).
  • The Breezy Apartment complex was recently sold to a new owner. The complex consisted of 70 apartments and sold for $800,000. The purchase agreement did not allocate any amount for tangible personal property that was included in the sale/purchase agreement, however, the appliances (refrigerators, range and range hoods, microwaves, dishwashers, garbage disposal, and air conditioners) and window coverings that are located in each apartment unit are all subject to use tax at their fair market value. In addition, the washers and dryers located in the on-site laundry facility, the clubhouse furniture, and game room equipment, as well as office equipment and furniture are also subject to use tax.
  • Sally's Chocolates located in Olde Town Arvada provides complimentary samples of chocolates to customers that visit the shop. Since the ingredients for the chocolates are purchased for resale, the chocolates that are used for the sample would be subject to use tax when taken out of inventory. Use tax is due to the cost of the ingredients.

Note: This information is a summary in layman's terms of the relevant Arvada tax law for this subject, industry, or business segment. It is not intended for legal purposes to be substituted for the full text of the Arvada tax code. However, the tax guide shall be used in conjunction with the Arvada tax code (chapter 98) in determining tax liability.