Colorado Provides Guidance on Sale-Leaseback Transactions

Monday, October 26th, 2015

 
 
Colorado Department of Revenue
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Colorado
General

The Colorado Department of Revenue (DOR) issued a general information letter discussing how tax applies to sale-leaseback transactions.

A sale-leaseback transaction occurs when a lessee purchases tangible personal property from a retailer, resells the property to a lessor, and then leases the property back from the lessor.

In Colorado, the initial purchase of the property from the retailer by the lessee is exempt from tax as a sale for resale if (1) the lessee purchases the property with the intent to resell the property and (2) the lessee resells it the property without using it.

The taxability of the lessor's purchase of the property depends on the terms of the lease. Colorado treats financing leases and leases of 36 months or more and as regular sales. For these leases, the lessor should purchase the property exempt for resale and charge tax to the lessee on each lease payment.

For leases of less than 36 months, the lessor must either (1) pay tax on its purchase of the property and then not collect tax on the lease payments or (2) get permission from the DOR to collect tax from the lessee on the lease payments instead of paying tax on its purchase.

http://my.ttrus.com/content/law/CO_No_GIL_15_023_1445285958.pdf


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