Form Dr 1191 - Sales Tax Exemption On Purchases Of Machinery And Machine Tools (Page 2 of 2) in pdf

DR 1191 INSTRUCTIONS

GENERAL INFORMATION

Purchases of machinery or machine tools and parts thereof are exempt from state sales and use tax when the

machinery will be used in manufacturing. [C.R.S. 39-26-114(11)].

To qualify the machinery must:

• Be used in Colorado,

• Be used directly and predominantly to manufacture tangible personal property for sale or profit.

• Be of a nature that would have qualified for the federal investment tax credit under the definition of

section 38 property found in the Internal Revenue Code of 1954, as amended. This includes tangible

personal property with a useful life of one year or more and limits qualifying purchases of used equipment

to a maximum of $150,000 annually,

• Be included on a purchase order or invoice totaling more than $500,

• Be capitalized.

ENTERPRISE ZONES

The manufacturing exemption is expanded to exempt additional purchases from sales and use tax when

machinery is used solely and exclusively in an enterprise zone. Equipment that is used both within and

outside an enterprise zone only qualifies for the regular statewide exemption, as is equipment used at a

location prior to that location’s designation as an enterprise zone. [C.R.S. 39-30-106(1)]

• Machinery used solely and exclusively in a designated enterprise zone may be capitalized or expensed to

qualify for the exemption.

• Materials for construction or repair of machinery or machine tools are exempt from the state sales and use

tax if the machinery is used exclusively in an enterprise zone.

• Mining operations are included in the definition of manufacturing when performed in an enterprise zone.

For further information, see FYI Sales 69, “Enterprise Zone Exemption for Machinery and Machine Tools

Used in Mining.”

LOCAL TAXES

Cities and counties may or may not exempt manufacturing equipment from local sales taxes. Refer to publication

DRP 1002 for a list of localities that exempt this equipment from local tax. The Regional Transportation District,

Cultural District, Football District (RTD/CD/FD) imposes a sales tax on manufacturing equipment, but cannot

impose a use tax on the equipment.

CLAIMING THE EXEMPTION

Complete Form DR 1191 Sales Tax Exemption on Purchases of Machinery and Machine Tools. Give one copy

of the completed form to the seller of the machinery and a second copy to the Department of Revenue. The

purchaser must also keep a copy. An exemption cannot be claimed for sales tax paid in another state which is

credited against Colorado sales or use tax. NOTE: Acceptance of this certificate by the seller removes any

sales tax liability from the seller and the purchaser is liable for any subsequent sales or use tax liability for the

purchase.

For further information regarding the manufacturing exemption, see FYI Sales 10 available on our Web site at

, or call (303) 238-SERV (7378).

Form Dr 1191 - Sales Tax Exemption On Purchases Of Machinery And Machine Tools Page 2