Colorado Explains that Layaway Fees Are Not Subject to Sales Tax.

Thursday, May 31st, 2012

 
 
Share
Link
Colorado
General

The Colorado Department of Revenue recently issued guidance regarding the taxability of layaway service and cancellation fees. Colo. Gen. Info. Ltr. No. GIL-12-3 (Dept. of Revenue Feb. 29, 2012).

In this guidance, the DOR considered the following scenario: A Colorado retailer offers a layaway program to its customers. As part of the layaway program, customers are charged an initial service fee and must pay 10% down on their total purchase at the start of the program. In the event that the customer cancels their layaway purchase, the retailer will return the down payment plus any additional payments made towards the purchase to the customer. The retailer does not return the initial service fee and charges the customer an additional cancellation fee.

Colorado imposes sales tax on the sale of tangible personal property and certain taxable services. Colo. Rev. Stat. sec. 39-26-104. Sales tax does not generally apply to most services or finance fees. 1 Colo. Code Regs. 201-4:39-26-102.7(a)(4). Finance fees do not represent a sale and transfer of tangible personal property. Therefore, the initial layaway service fee will not be subject to tax. Similarly, a cancellation fee is not taxable because a transfer of taxable tangible personal property has not taken place. The cancellation fee is imposed only if a sale of tangible personal property is not completed between the customer and the retailer.


About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at www.ttrus.com or call 866.578.8193.

Participatory Sports are Taxable in New York

Friday, June 14th, 2019 -The New York Division of Tax Appeals recently denied a refund claim made by an instructor-led indoor spin clas...

Marketplace Facilitators to Collect Tax in Vermont

Thursday, June 13th, 2019 -Vermont recently passed a bill requiring marketplace facilitators to collect and remit sales tax on retail sal...

Agricultural Rotary Cutter Taxable in Arkansas

Wednesday, June 5th, 2019 -The Arkansas Department of Finance and Administration (DFA) recently determined that a rotary cutter used in t...

Wholesale Exemption Applies to Meals Purchased by...

Monday, June 3rd, 2019 -The Colorado Supreme Court recently ruled that a food service vendor made exempt wholesale sales of food and f...

Specialized Tools to Install Prosthetic Devices are...

Friday, May 31st, 2019 -The Wisconsin Tax Appeals Commission recently ruled that specialized tool kits used to install prosthetic devi...

Magnetically Cleaning Corn is Exempt in Ohio

Wednesday, May 22nd, 2019 -The Ohio Board of Tax Appeals recently ruled that a magnet used to clean or remove scrap metal from corn befor...