Colorado has issued a general information letter regarding whether a plumbing contractor was liable to pay sales tax on tangible personal property purchased for lump-sum and time and materials contracts. For lump-sum contracts, the contractor must pay sales tax on the property purchased to complete the contract and cannot charge and collect sales tax from its customers. For time and materials contracts, the contractor must be registered to collect sales tax and should collect sales tax on the amount charged to customers for the materials. The materials should be purchased exempt from tax under a resale exemption. Since the contractor didn’t have a Colorado sales tax license to collect and remit sales tax, the Department stated that the contractor must bill all its contracts on a lump-sum basis and not on a time and materials basis. If the contractor obtains a Colorado sales tax license, it can enter into time and materials contracts and charge sales tax accordingly. If the contractor did not mark up the price of the materials purchased, the contractor is not permitted to pay sales tax on the materials if customers are billed on a time and materials basis. The Department stated that the purpose of the rule is to deal with situations where there is a mark-up of the materials and that the rule does not make a distinction between contractors that mark up and those that do not. As a result, all contractors are required to follow the rule. The contractor regulation is under review by the Department and they may consider whether to accommodate this situation by regulation. (GIL 15-015, Colorado Department of Revenue, June 8, 2015, released August 2015)