- The Colorado Department of Revenue has issued Special Rule 46, clarifying sales and use tax treatment for tangible personal property leases, generally taxing them as retail sales unless an exemption applies.
- The rule distinguishes between long-term (over 36 months) and short-term leases (36 months or less), impacting the taxability of lease payments and the lessor’s acquisition of the property, with specific requirements for each.
- The rule emphasizes “substance over form” and places heightened scrutiny on related-party leases and sale-leaseback transactions, requiring arm’s-length pricing and economic substance to avoid recharacterization and potential tax liabilities.
Source EY
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