C.R.S. § 39-27-102.5 — Exemptions on tax imposed - ex-tax purchases - performance statement - definition - repeal

(1) (Deleted by amendment, L. 2005, p. 866, § 2, effective July 1, 2005.) (1.5) Except as otherwise provided in this section, diesel engine fuel and kerosene is presumed to be for use for a taxable purpose unless indelible dye meeting federal regulations is added to the diesel engine fuel or kerosene before or upon removal from a terminal. Such dyed special fuel is exempt from the excise tax imposed pursuant to this part 1. The tax-exempt special fuel shall not be used for taxable purposes; except that dyed special fuel may be used for a taxable purpose to the extent that such use is allowed under federal law or regulations with such fuel being subject to the excise tax imposed pursuant to this part 1. For purposes of this subsection (1.5), taxable purpose means any use on which an excise tax on special fuel is imposed pursuant to this part 1. The terminal operator shall ensure that tax-exempt special fuel is dyed before it leaves the terminal. Every seller thereafter shall give notice to any purchaser in accordance with federal regulations that the dyed special fuel may not be used for a taxable purpose. (2) (a) Dyed diesel fuel purchased to propel farm vehicles, when the same are being used on farms and ranches, farm tractors, and implements of husbandry only incidentally operated or moved on a highway, when operated off the public highways, and vehicles or construction equipment operated within the confines of highway construction projects when the same are actually being used in the construction of such highways is exempt from the excise tax imposed pursuant to this part 1. In accordance with section 39-27-104 (1)(d.5), dyed diesel fuel may be blended by a licensed distributor with biodiesel fuel after withdrawal at a terminal up to the maximum federally allowable blend. Such blended special fuel is exempt from the excise tax imposed pursuant to this part 1, so long as it is purchased for the purposes set forth in this subsection (2)(a). A person who purchases undyed special fuel for the purposes set forth in this subsection (2)(a) may, in accordance with section 39-27-103, apply to the department of revenue for a refund of the excise tax paid thereon. (b) (I) (Deleted by amendment, L. 2005, p. 866, § 2, effective July 1, 2005.) (II) Gasoline and special fuel purchased by the United States or any of its agencies, the state of Colorado or any of its agencies, any town, city, county, city and county, school district of this state, or any other political subdivision of this state is exempt from the excise tax imposed pursuant to this part 1, regardless of whether the special fuel is dyed pursuant to subsection (1.5) of this section, if the gasoline or special fuel is used exclusively by the governmental entity in performing its governmental functions and activities. This exemption only applies if the gasoline or special fuel purchased by the governmental entity is used in machines owned or operated by the governmental entity. Exemptions for persons conducting business for the governmental entities on a contract basis using an aircraft must be based solely on the applicable operating certificate of the aircraft operator pursuant to subsection (2.5) of this section. (III) (A) Any governmental entity referred to in subsection (2)(b)(II) of this section may obtain an exemption certificate from the executive director of the department of revenue pursuant to subsection (3) of this section. (B) A distributor may sell ex-tax gasoline or special fuel to a governmental entity with a valid exemption certificate, regardless of whether the special fuel is dyed pursuant to subsection (1.5) of this section. (C) A governmental entity with a valid exemption certificate may sell to or purchase gasoline or special fuel from another governmental entity that also has a valid tax exemption certificate. The gasoline or special fuel must be used exclusively by the purchasing governmental entity in performing its governmental functions and activities in machines owned or operated by the governmental entity. A governmental entity is required to keep a copy of the fuel tax exemption certificate on file for any entity to which it resells or distributes fuel. A governmental entity that sells gasoline or special fuel pursuant to this subsection (2)(b)(III)(C) is not required to be a licensee pursuant to section 39-27-104. Sales authorized pursuant to this subsection (2)(b)(III)(C) are intended to facilitate intergovernmental efficiencies with respect to sales for individual vehicles or equipment. This subsection (2)(b)(III)(C) does not apply to intergovernmental sales in excess of five hundred gallons in a single transaction unless required for unusual, unforeseen, or emergency circumstances. (D) In the case of gasoline or special fuel acquired by a governmental entity upon which the tax imposed by this part 1 was paid, the governmental entity may apply to the department of revenue for a refund of the excise tax paid thereon in accordance with section 39-27-103. (c) Any person operating a vehicle other than a qualified motor vehicle pursuant to the motor fuel tax cooperative agreement entered into under part 3 of this article may bring into this state for the operation of such vehicle only the amount of special fuel that is in the ordinary fuel tank attached to such vehicle without being liable for the payment of the tax under this part 1. (2.3) (a) The purpose of the exemption authorized in subsections (1.5) and (2)(a) of this section is to entirely exclude dyed diesel or kerosene from the special fuels excise tax where the dyed fuel is used for specified off-road purposes or by governmental entities. (b) The effectiveness of the exemption authorized in subsections (1.5) and (2)(a) of this section is measured by the number of taxpayers claiming the exemption and the amount of tax that would have been paid without the exemption. (2.5) (a) (I) Products, including kerosene, specially prepared, sold, and used in aircraft operated by scheduled air carriers or commuter airline operators exempt from the federal aviation fuels tax are exempt from the tax imposed pursuant to this part 1. (II) Prior to January 1, 2025, gasoline used by domestic or foreign part 121 air carriers or part 135 commuter air carriers authorized to provide passenger and cargo air transportation services pursuant to the regulations of the office of the secretary of transportation and federal aviation administration of the United States department of transportation is exempt from the tax imposed pursuant to this part 1. For those air carriers that are certificated by the United States department of transportation for both part 121 air carrier operations and part 135 on-demand operations, the provisions of this subsection (2.5)(a)(II) shall not apply to the air carrier's part 135 on-demand operations. (III) Prior to January 1, 2025, gasoline used by direct air carriers providing air transportation to authorized public charter operators pursuant to 14 CFR 380 is exempt from the tax imposed pursuant to this part 1. (IV) Subsections (2.5)(a)(II) and (2.5)(a)(III) of this section and this subsection (2.5)(a)(IV) are repealed, effective December 31, 2028. (b) A distributor or terminal operator may sell ex-tax gasoline or special fuel to an air carrier described in this subsection (2.5). In the case of gasoline or special fuel acquired by an air carrier described in this subsection (2.5) upon which the tax imposed by this part 1 was paid, the air carrier may apply to the department of revenue for a refund of the excise tax paid thereon in accordance with section 39-27-103. (c) Nothing in this subsection (2.5) exempts sales of aviation fuel from the sales tax imposed under article 26 of this title 39. (3) (a) (Deleted by amendment, L. 2021.) (b) (I) The executive director of the department of revenue shall issue an exemption certificate to a user of gasoline or special fuel to purchase ex-tax gasoline or special fuel if the user is exempt under subsection (2) or (2.5) of this section. (II) A distributor may sell ex-tax gasoline or special fuel pursuant to subsections (2) and (2.5) of this section. The distributor may claim a credit against the tax accrued and payable for taxes due on ex-tax gasoline or special fuel or for taxes paid on ex-tax gasoline or special fuel by such distributor in a prior taxable period. If the distributor establishes that a tax was imposed and paid under this article 27 by a licensed distributor, special fuel is allowed as a credit on the distributor's next return. To the extent the credit exceeds the tax due, the executive director of the department of revenue shall issue a refund of such excess. The manifest, bill of lading, invoice, or other similar document issued by the supplier, importer, or distributor must state that the gasoline or special fuel is sold on an ex-tax basis. (c) With each sale of gasoline or special fuel made without payment of the tax pursuant to this subsection (3), the distributor shall secure evidence that the user is exempt from tax under this section. (d) A distributor has the burden of proving that gasoline or special fuel is exempt from tax pursuant to this section. The department of revenue may prescribe reasonable requirements of proof for the exemption. (4) (Deleted by amendment, L. 2000, p. 1932, § 15, effective October 1, 2000.) (5) to (8) Repealed. (9) Compressed natural gas used to propel a motor vehicle on the highways of this state that is supplied to the user at a residential home is exempt from the special fuel tax imposed by this article. (10) Gasoline or special fuel removed from a terminal by a licensed exporter exclusively for delivery to another state is exempt from the tax imposed by this part 1. Source: L. 2000: Entire section added with relocated provisions, p. 1932, § 15, effective October 1. L. 2002: (2)(a), (2)(b)(I), (2)(b)(II), and (7) amended, p. 552, § 1, effective May 24. L. 2005: (1), (1.5), (2)(b)(I), IP(5)(a), (5)(b), (5)(e), (5)(f), (6)(a), and (7) amended, p. 866, § 2, effective July 1. L. 2009: (1.5) and (2)(a) amended, (SB 09-098), ch. 195, p. 877, § 2, effective August 5. L. 2013: (5), (6), and (8) repealed, (7) amended, and (9) added, (HB 13-1110), ch. 225, p. 1060, § 7, effective January 1, 2014. L. 2015: (3)(a) amended, (HB 15-1228), ch. 315, p. 1287, § 4, effective January 1, 2016. L. 2020: (7) repealed, (HB 20-1181), ch. 91, p. 365, § 2, effective September 14. L. 2021: (1.5), (2)(a), (2)(b)(II), (2)(b)(III), and (3) amended and (2.5) and (10) added, (HB 21-1322), ch. 453, p. 3004, § 3, effective January 1, 2022. L. 2024: (2.5)(a)(II) and (2.5)(a)(III) amended and (2.5)(a)(IV) added, (HB 24-1036), ch. 373, p. 2532, § 26, effective August 7. L. 2025: (2.3) added, (SB 25-026), ch. 362, p. 1965, § 7, effective August 6. Editor's note: This section is similar to former § 39-27-202 as it existed prior to 2000. Cross references: (1) For the legislative declaration in the 2013 act repealing subsections (5), (6), and (8), amending subsection (7), and adding subsection (9), see section 1 of chapter 225, Session Laws of Colorado 2013. (2) For the legislative declaration in HB 15-1228, see section 1 of chapter 315, Session Laws of Colorado 2015. For the legislative declaration in HB 20-1181, see section 1 of chapter 91, Session Laws of Colorado 2020. For the legislative declaration in HB 24-1036, see section 1 of chapter 373, Session Laws of Colorado 2024.