Testing Product For Resale Is Not "Use" in Colorado

Monday, March 16th, 2015

 
 
A mining site with machinery.
Share
Link
Colorado
Manufacturing

The Colorado Department of Revenue ruled that testing a product before final sale was not a taxable use.

The taxpayer was developing and selling new technologies for oil, gas, geothermal, and mining operations. The taxpayer developed unique products and processes for each client. These products were sold once and were never mass-produced. Before final sale, the taxpayer tested the product. The test used less than one percent of the product's useful life span. The taxpayer asked whether materials purchased to create the products were taxable because they were used during testing.

Colorado taxes the privilege of storing, using, or consuming tangible personal property. When determining if an item is "used" in Colorado, the state looks several factors, including what the item's intended, or "primary," use is. Colorado does not tax materials that will be manufactured into a new product for resale.

The materials purchased by the taxpayer for testing and resale were exempt. The materials were purchased primarily for resale as part of developed products, not for use in testing. The testing was also an integral part of the manufacturing process. The materials were therefore not "used," and the taxpayer did not owe tax on them.

https://www.colorado.gov/pacific/sites/default/files/Research%20and%20Development%20Private%20Letter%20Ruling%20PLR%2015-002.pdf


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.

Marketplace Facilitators of Software Products to be...

Friday, March 15th, 2019 -The Commissioner of Taxation and Finance in New York released an advisory opinion that determined third partie...

Arkansas Rules on Taxability of Repairs and Labor Related...

Wednesday, March 13th, 2019 -The Arkansas Department of Finance and Administration recently released an administrative decision addressing ...

Studio Room Rental for Photography Sessions is Subject to...

Wednesday, March 6th, 2019 -The Missouri Department of Revenue (DOR) has released a letter ruling addressing the taxability of studio room...

Unprocessed Sand Not Taxable in Texas

Monday, March 4th, 2019 -The Texas Comptroller recently released a private letter ruling that found the mining and selling of unprocess...

California to Require Additional Registration and...

Friday, March 1st, 2019 -California recently released a special notice for out-of-state retailers who are required to register with the...

Guided Hunting and Fishing Trips are Taxable in Washington

Wednesday, February 27th, 2019 -The Washington Department of Revenue recently published guidance stating that guided hunting and fishing trips...