What type of tax is the Colorado Use Tax classified as?

The Colorado Use Tax is classified as a sales tax. This tax applies to the purchase of goods that are used, stored, or consumed in Colorado when sales tax has not already been paid. In essence, the Use Tax is designed to ensure that all consumers pay tax on tangible personal property, regardless of whether it was purchased within or outside the state.

For instance, if a resident buys a product from an out-of-state retailer and does not pay sales tax at the point of sale, they are responsible for paying the Use Tax directly to the state. This aligns with the general purpose of sales taxes, which is to raise revenue based on consumption.

Understanding that the Use Tax functions similarly to a sales tax is important for compliance, as it helps to level the playing field between in-state and out-of-state sellers and ensures that all consumers contribute to state revenues based on their purchases.