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Department of Revenue Seeks to Strike Reg for Special Use

Under this special regulation, the state authorized the issuance and taxation of ‘special use’ license plates for dealers to use in qualified situations. The use of the license plates typically triggered a taxable event. Under the old system, the temporary use of the vehicle for a special event came hand in hand with the collection and remittance of a use tax, or in the event of an outright donation – a sales tax.


A recent reconfiguration of various license plates available to a motor vehicle dealer has changed this analysis. Typically, when a dealer provides a vehicle for temporary use at a special event, or off-site location, such is done for marketing purposes, as well as charitable intent. Since those vehicles are in the inventory of the dealer, and typically unplated (when delivered by truck), or under a Dealer Full Use (DLR) plate and continue to be for sale throughout the donated use, they fall under the wholesale exemption and neither require a special use plate nor the collection and remittance of a tax.


Since its promulgation, the Department has reviewed the regulation and no longer believes it is consistent with the newest version of the statute that authorized it. Therefore, following a public comment period, the Department is proposing to repeal the regulation outright. Since the regulation is a clean repeal, no stakeholder process is envisioned.


Further conversation with the Department highlighted that the intent of the repeal was to collect a sale or use tax only during a taxable event, like when a car comes out of a dealer’s inventory. That is not the case as it is displayed at a special event. This will pull the taxation system in line with judicial precedent in IBM v. Charnes and CF&I Steel v. Charnes. It also recognizes that the donation of the temporary use of the motor vehicle is not a retail sale, and therefore, does not constitute a taxable transaction.


However, the permanent donation of a vehicle does take the car out of inventory. Therefore, it would become a taxable event upon which the retailer/dealer would be required to collect a sales tax. This will be the one instance in which a donation would continue to trigger a tax liability for the dealership.


Through consultation with legal and accounting experts, CADA believes that this repeal is the right decision for the Department. The impacts on the dealer body should be minimal and there should not be a change in protocol for events like the Denver Auto Show, or marketing opportunities like placing a vehicle from inventory in a mall or at a special event.


If you have any questions, or believe this regulation would negatively impact your dealership’s ability to market your vehicles through special events, please contact Matthew Groves, at 303-282-1449, or matthew.groves@colorado.auto.

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