The Arvada Municipal Code imposes use tax on the storage, use, distribution or consumption of tangible personal property purchased at retail or the furnishing of taxable services, if the transaction was previously subjected to a lawfully imposed sales or use tax on the purchaser or user by another municipal jurisdiction equal to or in excess of Arvada’s use tax rate. A credit will be granted against the sales tax imposed by the subsequent jurisdiction with respect to such transaction equal in amount to the lawfully imposed municipal sales or use tax previously paid; however the amount of credit shall not exceed the sales tax imposed and paid. If a lesser tax was imposed and paid, then a credit is given for any lawfully imposed municipal tax paid and the incremental difference is still owed to Arvada.
When a municipal sales tax is collected in error or when an unlicensed vendor collects Arvada sales tax and fails to remit the sales tax, the credit will be denied if the City of Arvada is unable to recover the tax from the vendor or municipality.
- ABC Title Company has a branch office located here in Arvada. The main office is located in Lakewood. All of the office supplies that are used in the Arvada branch office are ordered by and delivered to the main office in Lakewood. Only 3% local sales tax has been paid on the office supplies that are used at the Arvada branch office; therefore, use tax is due to Arvada on the supplies for the incremental difference of .46% (3.46% Arvada Sales Tax less 3.00% Lakewood Sales Tax).
- John’s Appliance Service, which is located in Denver, has been hired by the Panda Panda restaurant to service their walk-in cooler and freezer at the restaurant location. John charges Panda Panda time and materials along with 7.62% sales tax, which includes 3.62% Denver sales tax. The sales tax that has been charged by John’s Appliance Service was an unlawfully imposed tax, because the services were performed at the Arvada location. If the Denver tax on the material portion of the service charged is not recovered from either John’s Appliance Service or the City and County of Denver, then credit will be denied and Panda Panda will owe use tax at the Arvada rate.
When it has been determined that sales and use tax owed to Arvada has been erroneously paid by a taxpayer or vendor to another municipality, the City shall promptly notify that taxpayer and request permission to contact their vendor. In order to recover such taxes improperly remitted to another municipality, Arvada may either:
- institute procedures for collections of the tax, penalty and interest from the taxpayer or vendor, or
- make a written claim for recovery directly to the municipality that received the tax, penalty or interest owed to Arvada
Origin Sourcing States
The following 12 states are Origin Based Sourcing states where sales tax is collected at the “Point of Origination” and not the “Point of Delivery” which would be destination based sourcing:
- New Mexico (Gross receipts tax - destination sourcing effective 7/1/2021)
As a general rule, in an origin-based rate sourcing state, the appropriate sales tax rate charges for sales may be affected by one or more of the follow:
- Whether the seller has one or more locations in the state
- If the seller takes orders in the state
- Whether the seller “sells over the counter” from a location in the state
- Whether the seller passes title to the items sold in the state
- If the seller has outside sales people “working out of” a location in the state
Bob’s Accounting & Tax Service ordered and has delivered a new computer system at their Arvada business location. The computer system was ordered from XYZ Computers, which was located in Dallas, Texas. XYZ Computers charged Bob 8.25% Texas sales tax on the new $10,000.00 computer system. Texas is an origin based state and when the seller takes order in Texas then the 8.25% is a lawfully imposed tax. Bob’s Accounting & Tax Service would owe no additional taxed as the credit that would be granted exceeds the total current combined use tax rate of 7.46% (2.9% Colorado, 1.1% RTD/CD and 3.46% Arvada, effective 01/01/06).
Tax Paid Out of State
When the sales transaction takes place out of state and a lawfully imposed sales or use tax has been paid on the purchase, the taxpayer shall be entitled to the full credit for the combined amount of sales or use tax paid up to the combined Arvada use tax rate - see the Commerce Clause of the U.S. Constitution – dormant Commerce Clause. The credit shall be applied first against the amount of any use tax due the state, and any unused portion of the credit shall then be applied against the amount of any use tax due a subdivision. – see Multistate Tax Compact. C.R.S. 1973, 24-60-1301.
The corporate office of Big Box Department Store, which is located in Ohio, purchases fixtures and supplies in bulk to be distributed to their 500 locations throughout the United States. The items are delivered to a warehouse in Ohio where Ohio sales / use tax is paid at a rate of 6.50%. Since this is a lawfully imposed tax, credit is given for the full tax paid by the taxpayer. The credit shall be applied first against the amount of any use tax due the state, and any unused portion of the credit is then applied against the amount of any use tax due a subdivision.
For any fixtures and/or supplies that are shipped from the Ohio corporate location to the Arvada – Big Box Department Store, tax will need to pay equal to the total current combined use tax rate of 7.46% (2.9% Colorado, 1.1% RTD/CD and 3.46% Arvada, effective 01/01/06). Jefferson County and Adams County do not impose a use tax. The combined use tax rate less the Ohio tax credit would leave the remaining amount of use tax due to Arvada at 0.96% = 7.46% - 6.5%. The Big Box Department Store will pay no more tax than it would have paid in Arvada using combined the use tax rate.
When tangible person property has been acquired and used for its intended purpose prior to becoming a resident of Arvada, then the property would be exempt from use tax.
*This information is a summary in layman's terms of the relevant Arvada tax law for this subject, industry, or business segment. It is not intended for legal purposes to be substituted for the full text of the Arvada tax code. However, the tax guide shall be used in conjunction with the Arvada tax code (chapter 98) in determining tax liability.
- by Finance