Construction and building materials - legislative declaration - definition

(a) (I) The United States government, the state of Colorado, its departments and institutions, and its political subdivisions in their governmental capacities only;

(II) As used in this subsection (1)(a), governmental capacities includes the building, erection, alteration, or repair of structures to house employees or contractors of a regional transportation authority, as allowed by sections 43-4-604

(3)(j) and 43-4-605 (1)(l), and as an implied and necessary power within section 43-4-605 (1)(k);

(c) Schools, other than schools held or conducted for private or corporate profit.

(2) There shall be exempt from taxation under part 2 of this article 26 the storage, use, or consumption by a contractor or subcontractor of construction and building materials for use in the building, erection, alteration, or repair of structures, highways, roads, streets, and other public works owned and used by:

(a) (I) The United States government, the state of Colorado, its departments and institutions, and its political subdivisions in their governmental capacities only;

(II) As used in this subsection (2)(a), governmental capacities includes the building, erection, alteration, or repair of structures to house employees or contractors of a regional transportation authority, as allowed by sections 43-4-604

(3)(j) and 43-4-605 (1)(l), and as an implied and necessary power within section 43-4-605 (1)(k);

(b) Charitable organizations in the conduct of their regular charitable functions and activities; or

(c) Schools, other than schools held or conducted for private or corporate profit.

(2.5) (a) The general assembly finds, determines, and declares that:

(I) The exemption under this section was enacted by the general assembly to reduce costs involved in the construction of public works;

(II) The exemption codifies the principle that contractors should not be paying a tax levied by governmental entities on building materials used for the benefit of those same governmental entities;

(III) Under current law, out of the state and all local governments across the state, the sales and use tax on construction and building materials used in the construction of public buildings is only levied by home rule cities;

(IV) The state's ability to honor its responsibilities under section 2 of article IX of the state constitution to provide for the establishment and maintenance of a thorough and uniform system of free public schools throughout the state is impaired when home rule cities tax public school construction materials because this tax increases the cost of providing public education within the boundaries of these municipalities as contrasted with public schools located within the boundaries of other municipalities that do not tax these materials;

(V) The state's responsibility to provide a thorough and uniform education is further impaired by the incentives created by the current tax disparities. Specifically, insofar as school districts serve the residents of multiple municipalities and not all of the municipalities tax public school construction materials, school districts are given incentives to build schools within those municipalities where the sales and use tax is not levied, rather than where the public schools are most needed, thereby depriving students and communities of local education resources.

(VI) Extending the exemption to include home rule cities would eliminate these barriers and disparities and assist the state in honoring its responsibilities under section 2 of article IX of the state constitution;

(VII) The current taxing system also creates negative extraterritorial impacts because taxpayers that reside in school districts that serve both taxing and nontaxing municipalities must subsidize the cost of the sales and use tax levied when public schools are built in municipalities that tax public school construction materials, even when such residents do not reside in the taxing municipality and their children do not attend public schools in the taxing municipality;

(VIII) Extending the exemption to include the sales and use tax levied by home rule cities on public school construction materials would reduce the overall costs of constructing such facilities for the many jurisdictions across the state that are home rule cities; and

(IX) Extending the exemption to include home rule cities would also promote a uniform and consistent treatment of the sale of building and construction materials statewide, thereby facilitating a more consistent and uniform tax structure, would limit the negative extraterritorial effects of this disparate tax treatment, and enhance taxpayer equity in all school districts statewide. Accordingly, the matters addressed in subsection (2.5)(b) of this section are matters of statewide concern.

(b) Notwithstanding any other provision of law, in addition to the exemption from taxation created by subsections (1) and (2) of this section, there shall also be exempt from taxation under part 1 of this article 26 any tax levied by a home rule city on all sales of construction and building materials to contractors and subcontractors for use in the building, erection, alteration, or repair of a public school.

(c) As used in subsection (2.5)(b) of this section, public school means a school that serves any of grades kindergarten through twelve and that derives its support, in whole or in part, from revenue raised by a general state or school district tax. Public school includes a charter school authorized by a school district pursuant to part 1 of article 30.5 of title 22, by the state charter school institute pursuant to part 5 of article 30.5 of title 22, or by the Colorado school for the deaf and the blind pursuant to section 22-80-102 (4).

(3) On application by a purchaser or seller, the department of revenue shall issue to a contractor or subcontractor a certificate of exemption indicating that the contractor's or subcontractor's purchase of construction or building materials is for a purpose stated in subsection (1) of this section and is, therefore, free from sales tax. Unless the department determines pursuant to section 39-26-730 (2) that forms can be consolidated or eliminated, the department shall provide forms for the application and certificate and shall have the authority to verify that the contractor or subcontractor is, in fact, entitled to the issuance of the certificate prior to such issuance.