Colorado Sales Tax Exemptions / Tax Free Items Colorado: Sales Tax Handbook

Colorado:

What purchases are exempt from the Colorado sales tax?

While the Colorado sales tax of 2.90% applies to most transactions, there are certain items that may be exempt from taxation. This page discusses various sales tax exemptions in Colorado.

Sales Tax Exemptions in Colorado

In Colorado, certain items may be exempt from the sales tax to all consumers, not just tax-exempt purchasers.

The state exempts groceries, prescription drugs, and certain medical devices from the general sales tax. In addition, any leases of tangible property with terms of three years or less are also considered to be exempt from taxation.

Many states have special, lowered sales tax rates for certain types of staple goods - such as groceries, clothing and medicines. Restaurant meals may also have a special sales tax rate. Here are the special category rates for Colorado:


Clothing

  2.9%

Groceries

  EXEMPT

Prepared Food

  2.9%

Prescription Drugs

  EXEMPT

OTC Drugs

  2.9%

These categories may have some further qualifications before the special rate applies, such as a price cap on clothing items. Groceries are generally defined as "unprepared food", while pre-prepared food may be subject to the restaurant food tax rate.

Candy and soda may be included or excluded from any preferential tax rate depending on whether or not the state considers them to be a "grocery":


Is candy taxable in Colorado? Candy is NOT considered a grocery in Colorado
Is soda taxable in Colorado? Soda is NOT considered a grocery in Colorado

Are services, shipping, installation, etc taxable in Colorado?

The taxability of transactions involving services, shipping, and installation of tangible goods can be slightly complicated with various laws applying to slightly different situations. To learn more about how these transactions, and other more complicated situations, are subject to the Colorado sales tax see the Colorado sales taxability FAQ page.


Other tax-exempt items in Colorado

This table lists a number of additional categories of goods and services that are exempt from Colorado's sales tax. For a list that also shows taxable items, see the list of taxable and nontaxable items in Colorado.

Category Exemption Status
Food and Meals
Grocery Food EXEMPT *
Manufacturing and Machinery
Machinery EXEMPT *
Raw Materials EXEMPT *
Utilities & Fuel EXEMPT
Medical Goods and Services
Medical Devices EXEMPT *
Medical Services EXEMPT
Newspapers and Magazines
Newspapers EXEMPT
Optional Maintenance Contracts
General Optional Maintenance Contracts EXEMPT *
Services
Janitorial Services EXEMPT
Transportation Services EXEMPT
Software and Digital Products
Canned Software - Downloaded EXEMPT
Custom Software - Delivered on Tangible Media EXEMPT
Custom Software - Downloaded EXEMPT
Customization of Canned Software EXEMPT
Trade-Ins
General Trade-Ins EXEMPT
Vending Machine Sales
Food EXEMPT *

* See notes in category taxability page for details



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Source: http://www.salestaxhandbook.com/colorado/sales-tax-exemptions