Sales Tax Exemptions & Deductions

Sales Tax Exemptions

Certain products and services are exempt form Colorado state sales tax. Carefully review the guidance publication linked to the exemption listed below to ensure that the exemption applies to your specific tax situation.

Also, exemptions may be specific to a state, county, city or special district. Look up the jurisdiction in the Geographic Information System (GIS) or the View Local Sales Tax Rates portion of Revenue Online for further information.

For more in depth information on products and services that are exempt from or not subject to sales tax, visit the Tax Policy & Research web page.

State Sales Tax Exempt Products & Services

• Food, including food sold through vending machines
  • Guidelines For Determining Sales Tax Rates For Taxable Food Items
  • Vending Machines
• Residential Energy Usage - all gas, electricity, coal, wood and fuel oil
• Medical Equipment & Medicine
• Coins and Precious Metal Bullion
• Farm Equipment
• Seeds, Plants and Trees
• Pesticides
• Machinery and Machine Tools, this form has been eliminated. Please refer to the form Manufacturing Publication issued Feb 2024 or the Supplemental Instructions Form DR 0100
• Sales of Low-Emitting Vehicles
• School Related Sales
• Renewable Energy Components
• Beetle Wood Products
• Space Flight
• Air Craft and Air Craft Parts

Tax Exempt Organizations

• Charitable Organizations
• Government Agencies & Institutions

Other Exemptions

• Affordable Housing Projects
• Certain Construction Projects

Sales Tax Deductions

The Deductions schedule on the Retail Sales Tax Return allows the following deductions from sales tax. Deductions taken on the "Other" line must include an explanation.

• Service sales (sales that were exclusively for services, not tangible personal product)
• Wholesale sales, including wholesale sales of ingredients and component parts
• Sales to governmental agencies, religious or charitable organizations (these sales should be documented and records kept)
• Sales of gasoline, dyed diesel, and other exempt fuels
• Sales of exempt drugs and medical devices
• Bad debts charged-off, returned goods, trade discounts and allowances where tax as paid (cash discounts are not allowed)
• Cost of utilities, excluding tax (restaurants only)
• Exempt agricultural sales, not including farm and dairy equipment
• Wholesale sales, including wholesale sales of ingredients and component parts
• Sales made to nonresidents or sourced to locations outside of Colorado
• Fair market value of property received in exchange and held for resale
• Sales of computer software that is not taxable

When you file through the Revenue Online service, you will be prompted to provide the deductions information and it will become part of the e-filed return.

If the return is filed on paper, the total from the Deductions schedule must be reported on the sales tax return and the Deductions schedule must also be submitted with the sales tax return.