C.R.S. § 39-28-104 — Evidence of payment of tax - credits - redemptions - repeal

(1) (a) (I) Payment of the taxes imposed by sections 39-28-103 and 39-28-103.5 and section 21 of article X of the state constitution shall be evidenced by the affixing of stamps to, or by an imprint or impression by suitable metering machines approved by the department on, packages containing cigarettes. The department shall procure stamps of such design and legend as it deems necessary and suitable for the purpose. Except as provided in subsection (1)(b) of this section, the department shall sell such stamps for cash to licensed wholesalers at a discount of four percent of their face value for sales occurring after July 1, 2005, but before January 1, 2021, and four-tenths percent of their face value for sales occurring on and after January 1, 2021, if payment is made on or before the tenth day of the month following the month in which the purchase is made to cover the licensed wholesaler's expense in the collection and remittance of such tax; but, if any licensed wholesaler is delinquent in remitting such payment, other than in unusual circumstances shown to the satisfaction of the executive director of the department, the licensed wholesaler shall not be allowed to retain any amounts to cover his or her expense in collecting and remitting said tax, and, in addition, the penalty imposed under section 39-28-108 (2) shall apply. The department shall keep accurate records of all stamps sold to each wholesaler. No wholesaler shall sell or transfer any stamps purchased pursuant to this article 28. (II) The executive director of the department may enter into contracts with third parties to act as the department's agents for the sale of stamps and matters relating to the sale of stamps. (b) The tax imposed pursuant to section 39-28-103.5 and section 21 of article X of the state constitution shall not be subject to the discount provided for in paragraph (a) of this subsection (1). (c) Repealed. (1.5) In any month that a wholesaler purchases an amount of stamps that is greater than the wholesaler's anticipated total monthly purchase of stamps, which shall be determined from the surety bond filed pursuant to section 39-28-102 (1.3)(a)(III) and (1.3)(b)(III), the wholesaler shall be required to pay cash or certified funds or use one of the electronic payment options offered by the department for the stamps that exceed the anticipated total monthly purchase of stamps upon the delivery of the stamps. This subsection (1.5) shall not apply if the wholesaler is exempt from the surety bond requirement pursuant to section 39-28-102 (1.3)(b)(III). (2) Each wholesaler shall affix stamps or cause them to be affixed, in such manner as the department may specify, to each individual package of cigarettes sold or distributed by such wholesaler or, in lieu thereof, an imprint or impression by means of a suitable metering machine approved by the department. Such stamps or imprints or impressions may be affixed by the wholesaler at any time before the cigarettes are transferred out of his possession. (3) Credit shall be given by the department for all taxes levied pursuant to this article 28 on unsalable merchandise when the department is satisfied that the same has been returned to the manufacturer or has been destroyed by the wholesaler or when the stamps are unusable because the tax rate has changed. The department shall redeem any unused and uncancelled stamps presented by any wholesaler within one year after the date of issue of said stamps at the price paid therefor by such wholesaler. (4) (a) Prior to January 1, 2025, credit shall be given by the department to a wholesaler for all taxes levied pursuant to this article and section 21 of article X of the state constitution and paid pursuant to the provisions of this article 28 that are bad debts. Such credit shall offset taxes levied pursuant to this article and section 21 of article X of the state constitution and paid pursuant to the provisions of this article only. No credit shall be given unless the bad debt has been charged off as uncollectible on the books of the wholesaler. Subsequent to receiving the credit, if the wholesaler receives a payment for the bad debt, the wholesaler shall be liable to the department for the amount received and shall remit this amount in the next payment to the department under this section or section 39-28-105. (b) Any claim for a bad debt credit under this subsection (4) shall be supported by all of the following: (I) A copy of the original invoice issued by the wholesaler; (II) Evidence that the cigarettes described in the invoice were delivered to the person who ordered them; and (III) Evidence that the person who ordered and received the cigarettes did not pay the wholesaler for them and that the wholesaler used reasonable collection practices in attempting to collect the debt. (c) If credit is given to a wholesaler for a bad debt, the person who ordered and received the cigarettes but did not pay the wholesaler for them shall be liable in an amount equal to the credit for the tax imposed in this article on the cigarettes. Subsequent to receiving the credit, if the wholesaler receives a payment for the bad debt and the wholesaler makes a payment to the department, the amount of taxes owed by such person shall be reduced by the amount paid to the department. (d) As used in this subsection (4), bad debt means the taxes attributable to any portion of a debt that is related to a sale of cigarettes subject to tax under this article, that is not otherwise deductible or excludable, that has become worthless or uncollectible in the time after the tax has been paid pursuant to this section or section 39-28-105, and that is eligible to be claimed as a deduction pursuant to section 166 of the federal Internal Revenue Code of 1986, as amended. A bad debt shall not include any interest on the wholesale price of cigarettes, uncollectible amounts on property that remain in the possession of the wholesaler until the full purchase price is paid, expenses incurred in attempting to collect any account receivable or any portion of the debt recovered, an account receivable that has been sold to a third party for collection, or repossessed property. (e) This subsection (4) is repealed, effective December 31, 2028. Source: L. 64: p. 822, § 1. C.R.S. 1963: § 138-8-4. L. 65: p. 1129, § 2. L. 73: p. 1451, § 3. L. 83: (1) amended, p. 2106, § 1, effective October 14. L. 86: (1) amended, p. 1113, § 12, effective July 1. L. 87: (1) amended, p. 1466, § 1, effective April 16. L. 88: (1) amended, p. 1338, § 1, effective July 1. L. 2003: (1) amended, p. 2636, § 4, effective June 5. L. 2004: (4) added, p. 265, § 1, effective August 4. L. 2005: (1.5) added, p. 720, § 4, effective June 1; (1) and (4)(a) amended, p. 907, § 3, effective June 2; (1) and (4)(a) amended, p. 922, § 4, effective June 2. L. 2017: (1)(c) amended, (HB 17-1136), ch. 76, p. 238, § 4, effective March 23. L. 2019: (1)(c) repealed, (HB 19-1256), ch. 395, p. 3515, § 6, effective August 2. L. 2020: (1)(a) and (3) amended, (HB 20-1427), ch. 248, p. 1190, § 5, effective January 1, 2021. L. 2024: (4)(a) amended and (4)(e) added, (HB 24-1036), ch. 373, p. 2532, § 27, effective August 7. Editor's note: Section 27 of chapter 248 (HB 20-1427), Session Laws of Colorado 2020, provides that this section takes effect on the date of the governor's proclamation or January 1, 2021, whichever is later, only if, at the November 2020 statewide election, a majority of voters approve the ballot issue referred in accordance with § 39-28-401. The ballot issue, referred to the voters as proposition EE, was approved on November 3, 2020, and was proclaimed by the Governor on December 31, 2020. The vote count for the measure was as follows: FOR: 2,134,608 AGAINST: 1,025,182 Cross references: For the legislative declaration contained in the 2005 act amending subsections (1) and (4)(a), see section 1 of chapter 241, Session Laws of Colorado 2005. For the legislative declaration in HB 24-1036, see section 1 of chapter 373, Session Laws of Colorado 2024.