The Colorado Supreme Court has ruled that electricity is treated as a service rather than tangible personal property under the state’s sales and use tax law. An electricity producer argued that electricity is tangible personal property, and that its production constitutes manufacturing, thereby entitling it to the manufacturing machinery exemption for machinery used in production. The taxpayer claimed that it was entitled to a refund for sales and use taxes paid on machinery purchased for the generation of electricity. The state’s manufacturing exemption applies to machinery used for the production of tangible personal property. Colorado does impose its sales and use tax on electricity – however, not as the sale of tangible personal property. Tax is imposed on “electric service, whether furnished by municipal, public or private corporations or enterprises, for gas and electricity furnished and sold for commercial consumption and not for resale.” The court found that the Colorado General Assembly treated electricity as a service rather than as tangible personal property. As a result, the taxpayer was not eligible for the exemption for machinery used in the production of electricityas it was not tangible personal property.(Department of Revenue v. Public Service Co., Colorado Supreme Court, No. 11SC759, June 30, 2014)