Sales tax can be one of the most confusing topics when buying building materials. It is often not factored into the budget, which can turn out to be a significant error since sales tax will add 4-9% to the materials total. As a rule, Front Range Lumber charges for the tax rate for the location where you take possession of the material. Therefore, picking up material at Front Range Lumber’s store results in being charged the Lakewood, CO, tax rate (as of 2019, 7.5%).

With recent changes required by the Colorado Department of Revenue, all businesses will be charging the sales tax rate on merchandise they ship. This means that shipments/deliveries will be billed the sales tax of the destination. This represents a large departure from current practices where most businesses were collecting sales tax only from their “home” or surrounding jurisdictions.

We take great pains to ensure that the tax rate we charge you is correct and we are in compliance with the law.

Tax Rates

Tax rates vary be region and since we deliver throughout the area, this rate can/will change by the specific job location on which you are working. As an illustration, if a delivery is made within the City of Lakewood (or you pick it up at our Lakewood store), you will be charged the current total “Lakewood” sales tax (7.5%). Although this tax is commonly referred to as a Lakewood tax, like all jurisdictions, it really is a composite of multiple jurisdictions. In most cases, the components are state, county, special district and local city taxes. This list is a breakdown of the following individual jurisdiction taxes for this “Lakewood” example:

City of Lakewood:3.0%
State of Colorado:2.9%
Jefferson County:0.5%
RTD:0.5%
Cultural/Football District:0.6%

Permits

Under the special circumstances of building permits, you may have already paid “use” (sales) tax of the estimated value of the construction. If this is the case, by supplying us with a copy of the permit with EACH sale, you can avoid paying (City portion) sales tax twice. The City/County of Denver does NOT collect sales/use tax at the time of permitting; therefore, the full Denver 8.31% tax will be applied on any/all purchases.

Resale Businesses

Businesses are charged the responsibility to monitor purchases made by resale businesses. Any purchase made that is exempt from sales tax should be reasonably evaluated as an item used by the purchasing company in their normal line of business. For example, a sign company uses posts to install their signs. Conversely, a plane manufacturer does not use house paint on planes and therefore we would charge sales tax on those types of items. At best, the house paint would be used for maintenance of the factory’s buildings, making the paint a taxable purchase for maintenance.

Due to sales tax rules and regulations, we require additional documentation of your resale status.

Governments

To be exempt, purchases made by a qualifying government entity must be billed to the government and paid for directly from funds of the government. A “petty cash” purchase must be authorized by an official purchase order from the government. A copy of that purchase order must be kept as part of our records as a basis for exempting the sale from taxation. In addition, a written statement of tax exempt status will be required.

Note: Construction contractors who perform a construction contract for a government entity are considered to be the ultimate user of the purchased material and will be generally subject to sales and use tax when buying materials used to perform the contract.

Exempt Organizations

Any purchases made by an exempt organization – school, church, club, etc. – must be paid for out of that organization’s own funds (i.e., check). As a general rule, payment by cash is not an acceptable means of payment as the source of the funds cannot be directly tied to that exempt organization. Due to sales tax rules and regulations, we require additional documentation of your exempt status.

Resources/References

  • City & County of Denver:
    denvergov.com/Portals/571/documents/TaxGuide
    (see #10, 40 and others)
  • Please refer to your particular jurisdiction’s specific rules, rates and guidelines.
  • The Colorado Department of Revenue has extensive materials on their website on this topic.