The Colorado Department of Revenue recently released an information letter on how sales tax applies to sales of manufactured homes.
Colorado sales tax applies to 52% of the price of a manufactured home as paid by the final user of the home. When a manufacturer sells a home directly to the homeowner, the homeowner pays tax on 52% of the price. If the manufacturer sells the home to a builder, the kind of contract the builder has with the homeowner will determine who must pay the tax.
If the builder has a lump sum contract with the homeowner, the builder must pay tax on its purchase of the home and not collect tax from the homeowner. This contract is treated as a sale of construction services. The builder is the consumer of the materials used in construction services. The builder is therefore the final user of the home.
If the builder has a time and materials contract with the homeowner, the builder may purchase the home free from tax as a purchase for resale. For a time and materials contract, the builder is treated as a retailer that will resell materials to the homeowner. The homeowner is therefore the final user of the home. The builder will collect tax from the homeowner.
The manufacturer must presume that the sale of a home to a builder is subject to tax. The burden is on the builder to show that the purchase qualifies for the resale exemption.