Colorado Utility Sales Tax Exemption
Colorado offers a sales tax exemption for electricity, natural gas, water, and other fuels used in qualifying industrial and manufacturing activities. This exemption is authorized under Colorado Revised Statutes §39-26-102(21).The exemption applies to energy used for:
Eligible Activities and Utilities
The exemption applies to energy used for: processing, manufacturing, mining and refining and all industrial uses. Eligible energy sources include: electricity, natural gas, coal, fuel oil, steam, nuclear fuel, and coke.
Utility Study Requirement
To qualify for the exemption, a utility study must be conducted to determine the percentage of energy used for qualifying activities. This study should list every piece of equipment and appliance that uses the utility, along with its annual consumption. If less than 75% of the energy is used for qualifying activities, the business must pay sales tax on the full amount and then apply for a refund. If 75% or more is used for qualifying activities, the business can submit a completed exemption certificate to the utility provider, who will then apply the exemption to the eligible portion of the utility usage.
Filing Requirements
To claim the exemption, businesses must submit a completed exemption certificate such as Colorado Form DR 1666 to their utility provider. This form documents the basis for the tax exemption and must be fully completed by the purchaser and provided to the vendor at the time of the sale. If sales tax was previously paid on qualifying utility usage, businesses may request a refund for up to 36 months. Refunds can be claimed either through the utility provider or directly from the Colorado Department of Revenue.