Colorado released a Private Letter Ruling (PLR) which is intended to provide clarity on sourcing for sales tax purposes when the end purchaser of tangible personal property has the items picked up by a third-party shipping company. The company requesting the PLR asked the Department of Revenue (DOR) to rule on whether an item could be sourced to a known destination when the items were picked up by a third- party company from the seller for sales tax purposes.
The Department ruled that when considering the definitions of “receipt” and “receive” in the context of sourcing, neither includes possession by a shipping company acting on behalf of the end purchaser. The DOR clarified in this scenario, the customer was not receiving the items in Colorado, the shipping company was. The actual receipt of the items and the first use by the customer happen at the final destination of the goods, and if that destination is known, the sale should be sourced there.
Taxpayers need to be aware of where to source sales when considering their sales tax responsibilities, and when “receipt” of goods takes place. In this situation, Colorado has clear sourcing guidelines allowing the taxpayer to source the sales to the out of state end destination. Other taxpayers should ensure they are correctly sourcing their sales in Colorado and beyond by carefully reading sourcing and sales tax rules in each state where they do business. As a note, Private Letter Rulings cannot be relied upon by any other taxpayer than the taxpayer to whom the ruling was made but can be looked to as guidance for your business’ situation. (Colorado Department of Revenue Private Letter Ruling 24-008, dated December 20, 2024)