(1) The following shall be exempt from taxation under the provisions of part 1 of this article 26:
(a) All sales of food purchased with food stamps. For the purposes of this subsection (1)(a), food has the same meaning as provided in 7 U.S.C. sec. 2012, as such section exists on October 1, 1987, or is thereafter amended.
(b) All sales of food purchased with funds provided by the special supplemental food program for women, infants, and children, as provided for in 42 U.S.C. sec. 1786. For the purposes of this paragraph (b), food shall have the same meaning as provided in 42 U.S.C. sec. 1786, as such section exists on October 1, 1987, or is thereafter amended.
(c) Any sale of any article to a retailer or vendor of food, meals, or beverages, which article is to be furnished to a consumer or user for use with articles of tangible personal property purchased at retail, if a separate charge is not made for the article to the consumer or user, if such article becomes the property of the consumer or user, together with the food, meals, or beverages purchased, and if a tax is paid on the retail sale as required by section 39-26-104 (1)(a) or (1)(e); except that, on or after March 1, 2010, any such article that is nonessential to the consumer or user, as determined by rules of the department of revenue promulgated in accordance with article 4 of title 24, C.R.S., shall be subject to state sales taxation;
(d) Any sale of any container or bag to a retailer or vendor of food, meals, or beverages, which container or bag is to be furnished to a consumer or user for the purpose of packaging or bagging articles of tangible personal property purchased at retail, if a separate charge is not made for the container or bag to the consumer or user, if such container or bag becomes the property of the consumer or user, together with the food, meals, or beverages purchased, and if a tax is paid on the retail sale as required by section 39-26-104 (1)(a) or (1)(e); except that, on and after March 1, 2010, any such container or bag that is nonessential to the consumer or user, as determined by rules of the department of revenue promulgated in accordance with article 4 of title 24, C.R.S., shall be subject to state sales taxation;
(e) Commencing January 1, 1980, all sales of food; and
(f) (I) (A) On and after July 1, 2016, all sales of food, food products, snacks, beverages, and meals provided for consumption by residents on the premises of a retirement community;
(B) On and after July 1, 2016, all sales to a retirement community of food, food products, snacks, beverages, and meals for purposes of a sale described in sub-subparagraph (A) of this subparagraph (I);
(C) On and after July 1, 2016, all sales of any container, bag, or article used by or furnished to a consumer for the purpose of packaging, bagging, or use with food, food products, snacks, beverages, and meals provided for consumption by residents on the premises of a retirement community; and
(D) On and after July 1, 2016, all sales to a retirement community of any container, bag, or article used by or furnished to a consumer for purposes of a sale described in sub-subparagraph (A) of this subparagraph (I).
(II) For purposes of this paragraph (f), food includes prepared salads, salad bars, and packaged and unpackaged cold sandwiches.
(1.5) (a) Notwithstanding the provisions of paragraph (e) of subsection (1) of this section, on and after May 1, 2010, sales of candy and soft drinks shall be subject to state sales taxation.
(b) For the purposes of this subsection (1.5):
(I) Candy means a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruit, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. Candy shall not include any preparation containing flour and shall require no refrigeration.
(II) Soft drinks means nonalcoholic beverages that contain natural or artificial sweeteners. Soft drinks do not include beverages that contain milk or milk products, soy, rice, or similar milk substitutes, or greater than fifty percent of vegetable or fruit juice by volume.
(2) The following shall be exempt from taxation under the provisions of part 2 of this article 26:
(a) Effective January 1, 1980, the storage, use, or consumption of food or meals that are provided to employees of the places described in section 39-26-104 (1)(e), if such are provided to such employees at no charge or at a reduced charge;
(b) The storage, use, or consumption of any article by a retailer or vendor of food, meals, or beverages, which article is to be furnished to a consumer or user for use with articles of tangible personal property purchased at retail, if a separate charge is not made for the article to the consumer or user, if the article becomes the property of the consumer or user, together with the food, meals, or beverages purchased, and if a tax is paid on the retail sale as required by section 39-26-104 (1)(a) or (1)(e); except that, on and after March 1, 2010, any such article stored, used, or consumed that is nonessential to the end consumer or user, as determined by rules of the department of revenue promulgated in accordance with article 4 of title 24, C.R.S., shall be subject to state use taxation;
(c) The storage, use, or consumption of any container or bag by a retailer or vendor of food, meals, or beverages, which container or bag is to be furnished to a consumer or user for the purpose of packaging or bagging articles of tangible personal property purchased at retail, if a separate charge is not made for the container or bag to the consumer or user, if the container or bag becomes the property of the consumer or user, together with the food, meals, or beverages purchased, and if a tax is paid on the retail sale as required by section 39-26-104 (1)(a) or (1)(e); except that, on and after March 1, 2010, any such container or bag stored, used, or consumed that is nonessential to the end consumer or user, as determined by rules of the department of revenue promulgated in accordance with article 4 of title 24, C.R.S., shall be subject to state use taxation;
(d) (I) Effective January 1, 1980, the storage, use, or consumption of food as defined in section 39-26-102 (4.5); except that, on and after May 1, 2010, the storage, use, or consumption of candy and soft drinks shall be subject to state use taxation.
(II) For the purposes of this paragraph (d):
(A) Candy means a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruit, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. Candy shall not include any preparation containing flour and shall require no refrigeration.
(B) Soft drinks means nonalcoholic beverages that contain natural or artificial sweeteners. Soft drinks do not include beverages that contain milk or milk products, soy, rice, or similar milk substitutes, or greater than fifty percent of vegetable or fruit juice by volume.
(e) (I) (A) On and after July 1, 2016, the storage, use, or consumption of food, food products, snacks, beverages, and meals provided for consumption by residents on the premises of a retirement community;
(B) On and after July 1, 2016, the storage, use, or consumption by a retirement community of food, food products, snacks, beverages, and meals for purposes of a sale described in sub-subparagraph (A) of subparagraph (I) of paragraph (f) of subsection (1) of this section;
(C) On and after July 1, 2016, the storage, use, or consumption of any container, bag, or article used by or furnished to a consumer for the purpose of packaging, bagging, or use with food, food products, snacks, beverages, and meals provided for consumption by residents on the premises of a retirement community; and
(D) On and after July 1, 2016, the storage, use, or consumption by a retirement community of any container, bag, or article used by or furnished to a consumer for purposes of a sale described in sub-subparagraph (A) of subparagraph (I) of paragraph (f) of subsection (1) of this section.
(II) For purposes of this paragraph (e), food includes prepared salads, salad bars, and packaged and unpackaged cold sandwiches.
(f) The storage, use, or consumption of all food purchased with food stamps. For purposes of this subsection (2)(f), food has the same meaning as provided in 7 U.S.C. sec. 2012, as such section exists on October 1, 1987, or is thereafter amended.
(g) The storage, use, or consumption of all food purchased with funds provided by the special supplemental food program for women, infants, and children, as provided for in 42 U.S.C. sec. 1786. For the purposes of this subsection (2)(g), food has the same meaning as provided in 42 U.S.C. sec. 1786, as such section exists on October 1, 1987, or is thereafter amended.
(2.5) For purposes of this section, retirement community means:
(a) An assisted living residence as defined in section 25-27-102 (1.3), C.R.S.;
(b) An independent living facility designed and operated specifically to serve as the primary residence for persons aged fifty-five or older that provides meals and other services to residents as part of a comprehensive fee, including a facility that qualifies as housing for older persons as defined in section 24-34-502 (7)(b) and a life care institution subject to article 49 of title 11; or
(c) A nursing care facility licensed under the authority of section 25-1.5-103 (1)(a)(I)(A), C.R.S., that provides services to persons who, due to physical condition, mental condition, or disability, require continuous or regular inpatient nursing care.
(3) The department of revenue may promulgate rules, in accordance with article 4 of title 24, C.R.S., to provide a means by which a person who sells candy or soft drinks at retail may, if necessary, reasonably estimate the amount of sales taxes due on such candy and soft drinks. For any return made prior to August 1, 2010, a person who sells candy or soft drinks at retail shall not be liable for any interest or other penalty imposed as a result of an error made in connection with the elimination of the exemption from state sales tax for sales of candy and soft drinks, as defined in paragraph (b) of subsection (1.5) of this section, by House Bill 10-1191, enacted in 2010.
(4) For any return made prior to June 1, 2010, a person who sells or stores, uses, or consumes items described in paragraphs (c) and (d) of subsection (1) and paragraphs (b) and (c) of subsection (2) of this section that are nonessential to the end consumer or user shall not be liable for any interest or other penalty imposed as a result of an error made in connection with the elimination of the exemption for such nonessential items from state sales and use tax by House Bill 10-1194, enacted in 2010.
Source: L. 2004: Entire part added with relocations, p. 1020, � 2, effective July 1. L. 2009: (2)(a) amended, (SB 09-121), ch. 421, p. 2338, � 2, effective June 4. L. 2010: (1)(c), (1)(d), (2)(b), and (2)(c) amended and (4) added, (HB 10-1194), ch. 10, p. 58, � 1, effective February 24; (1.5) and (3) added and (2)(d) amended, (HB 10-1191), ch. 7, p. 45, �� 1, 2, effective February 24; (2)(a) amended, (HB 10-1422), ch. 419, p. 2121, � 175, effective August 11. L. 2016: (1)(f), (2)(e), and (2.5) added, (HB 16-1187), ch. 205, p. 733, � 2, effective June 1. L. 2017: (2.5)(b) amended, (SB 17-226), ch. 159, p. 591, � 11, effective August 9. L. 2021: IP(1) and (1)(a) amended, (HB 21-1155), ch. 109, p. 434, � 5, effective May 7; IP(2) amended and (2)(f) and (2)(g) added, (HB 21-1177), ch. 55, p. 228, � 1, effective September 7.
Editor's note: (1) The provisions of this section are similar to several former provisions of �� 39-26-114 and 39-26-203 as they existed prior to 2004. For a detailed comparison, see the comparative tables located in the back of the index.
(2) Subsection (4) was originally enacted as subsection (3) in House Bill 10-1194 but has been renumbered on revision for ease of location.
Cross references: For the legislative declaration in HB 16-1187, see section 1 of chapter 205, Session Laws of Colorado 2016.
39-26-708. Construction and building materials - legislative declaration - definition. (1) There shall be exempt from taxation under part 1 of this article 26 all sales of construction and building materials to contractors and subcontractors for use in the building, erection, alteration, or repair of structures, highways, roads, streets, and other public works owned and used by:
(a) (I) The United States government, the state of Colorado, its departments and institutions, and its political subdivisions in their governmental capacities only;
(II) As used in this subsection (1)(a), governmental capacities includes the building, erection, alteration, or repair of structures to house employees or contractors of a regional transportation authority, as allowed by sections 43-4-604 (3)(j) and 43-4-605 (1)(l), and as an implied and necessary power within section 43-4-605 (1)(k);
(b) Charitable organizations in the conduct of their regular charitable functions and activities; or
(c) Schools, other than schools held or conducted for private or corporate profit.
(2) There shall be exempt from taxation under part 2 of this article 26 the storage, use, or consumption by a contractor or subcontractor of construction and building materials for use in the building, erection, alteration, or repair of structures, highways, roads, streets, and other public works owned and used by:
(a) (I) The United States government, the state of Colorado, its departments and institutions, and its political subdivisions in their governmental capacities only;
(II) As used in this subsection (2)(a), governmental capacities includes the building, erection, alteration, or repair of structures to house employees or contractors of a regional transportation authority, as allowed by sections 43-4-604 (3)(j) and 43-4-605 (1)(l), and as an implied and necessary power within section 43-4-605 (1)(k);
(b) Charitable organizations in the conduct of their regular charitable functions and activities; or
(c) Schools, other than schools held or conducted for private or corporate profit.
(2.5) (a) The general assembly finds, determines, and declares that:
(I) The exemption under this section was enacted by the general assembly to reduce costs involved in the construction of public works;
(II) The exemption codifies the principle that contractors should not be paying a tax levied by governmental entities on building materials used for the benefit of those same governmental entities;
(III) Under current law, out of the state and all local governments across the state, the sales and use tax on construction and building materials used in the construction of public buildings is only levied by home rule cities;
(IV) The state's ability to honor its responsibilities under section 2 of article IX of the state constitution to provide for the establishment and maintenance of a thorough and uniform system of free public schools throughout the state is impaired when home rule cities tax public school construction materials because this tax increases the cost of providing public education within the boundaries of these municipalities as contrasted with public schools located within the boundaries of other municipalities that do not tax these materials;
(V) The state's responsibility to provide a thorough and uniform education is further impaired by the incentives created by the current tax disparities. Specifically, insofar as school districts serve the residents of multiple municipalities and not all of the municipalities tax public school construction materials, school districts are given incentives to build schools within those municipalities where the sales and use tax is not levied, rather than where the public schools are most needed, thereby depriving students and communities of local education resources.
(VI) Extending the exemption to include home rule cities would eliminate these barriers and disparities and assist the state in honoring its responsibilities under section 2 of article IX of the state constitution;
(VII) The current taxing system also creates negative extraterritorial impacts because taxpayers that reside in school districts that serve both taxing and nontaxing municipalities must subsidize the cost of the sales and use tax levied when public schools are built in municipalities that tax public school construction materials, even when such residents do not reside in the taxing municipality and their children do not attend public schools in the taxing municipality;
(VIII) Extending the exemption to include the sales and use tax levied by home rule cities on public school construction materials would reduce the overall costs of constructing such facilities for the many jurisdictions across the state that are home rule cities; and
(IX) Extending the exemption to include home rule cities would also promote a uniform and consistent treatment of the sale of building and construction materials statewide, thereby facilitating a more consistent and uniform tax structure, would limit the negative extraterritorial effects of this disparate tax treatment, and enhance taxpayer equity in all school districts statewide. Accordingly, the matters addressed in subsection (2.5)(b) of this section are matters of statewide concern.
(b) Notwithstanding any other provision of law, in addition to the exemption from taxation created by subsections (1) and (2) of this section, there shall also be exempt from taxation under part 1 of this article 26 any tax levied by a home rule city on all sales of construction and building materials to contractors and subcontractors for use in the building, erection, alteration, or repair of a public school.
(c) As used in subsection (2.5)(b) of this section, public school means a school that serves any of grades kindergarten through twelve and that derives its support, in whole or in part, from revenue raised by a general state or school district tax. Public school includes a charter school authorized by a school district pursuant to part 1 of article 30.5 of title 22, by the state charter school institute pursuant to part 5 of article 30.5 of title 22, or by the Colorado school for the deaf and the blind pursuant to section 22-80-102 (4).
(3) On application by a purchaser or seller, the department of revenue shall issue to a contractor or subcontractor a certificate of exemption indicating that the contractor's or subcontractor's purchase of construction or building materials is for a purpose stated in subsection (1) of this section and is, therefore, free from sales tax. Unless the department determines pursuant to section 39-26-730 (2) that forms can be consolidated or eliminated, the department shall provide forms for the application and certificate and shall have the authority to verify that the contractor or subcontractor is, in fact, entitled to the issuance of the certificate prior to such issuance.
Source: L. 2004: Entire part added with relocations, p. 1021, � 2, effective July 1. L. 2022: (2.5) added, (HB 22-1024), ch. 106, p. 490, � 1, effective August 10; (3) amended, (HB 22-1039), ch. 54, p. 254, � 2, effective August 10. L. 2025: IP(1), (1)(a), IP(2), and (2)(a) amended, (SB 25-272), ch. 314, p. 1644, � 1, effective May 30.
Editor's note: The provisions of this section are similar to several former provisions of �� 39-26-114 and 39-26-203 as they existed prior to 2004. For a detailed comparison, see the comparative tables located in the back of the index.