Statement of Basis and Purpose
Colorado Department of Revenue
Farm Close-out Sale Exemption
39-26-716.4(a)
1 CCR 201-4
Basis
This regulation is promulgated pursuant to §39-21-112, §39-26-102(4), and §39-26-716(4)(a), C.R.S.
Purpose
The primary purpose of this regulation is to establish procedures for documenting and claiming the farm close-out exemption set forth in §39-26-716(4)(a) and defined in §39-26-102(4), C.R.S. Establishing this exemption is important both to purchasers, who are otherwise liable for sales and use tax, and to auctioneers who, as retailers, are responsible for collecting sales tax at auction sales (auctioneers are retailers/owners pursuant to §39-26-102(1.3), C.R.S. and, therefore, liable for unremitted sales tax pursuant to §39-26-105(1)(a), C.R.S.).
An auctioneer, who, as a retailer, is obligated to collect and remit sales tax, must exercise due diligence in determining whether a transaction is exempt. This regulation creates a presumption that an auctioneer acted with due diligence if the auctioneer obtains a written declaration regarding the statutory elements necessary to establish the exemption. Conversely, the department will presume that a sale for which a declaration has not been made is not exempt under the farm close-out sale exemption. Either presumption can be overcome by competent evidence.
Farm and ranch owners typically sell their goods at wholesale and, therefore, are not “retailer” for sales tax collection purposes. §§39-26-102(8) and 105(1)(a), C.R.S. When such owner engages an auctioneer to conduct an auction sale, the auctioneer must collect sales tax, unless the sale is exempt (e.g., if the sale is exempt as a farm close-out sale). §39-26-102(1.3), C.R.S. The farm or ranch owner in such case is not responsible for collecting sales tax.
However, when the farm or ranch owner holds a sales tax license issued by the department, the owner, rather than the auctioneer, is responsible for collecting sales tax due at an auction sale and must exercise the same due diligence that is required of an auctioneer who would otherwise be responsible for collecting sales tax. §39-26-102(1.3), C.R.S.