The Colorado DR 1191 form is a document used to claim a sales tax exemption on the purchase of machinery and machine tools in Colorado. This exemption applies when the machinery is used directly in manufacturing tangible personal property for sale or profit. Businesses located in designated enterprise zones may qualify for additional exemptions under specific conditions.
The Colorado DR 1191 form serves a crucial role in the state's sales tax exemption process, specifically for businesses involved in manufacturing. This form allows eligible purchasers to claim an exemption from state sales and use tax on machinery, machine tools, and related parts when these items are used directly in the manufacturing of tangible personal property intended for sale or profit. To qualify for this exemption, certain criteria must be met, including the requirement that the machinery be used predominantly in Colorado and that it meets specific federal investment tax credit standards. The form also addresses additional provisions for businesses located in designated enterprise zones, where expanded exemptions may apply. It is essential for both sellers and purchasers to understand the implications of completing the DR 1191, as it not only facilitates tax savings but also delineates responsibilities regarding tax liability. Proper completion and submission of the form, including providing copies to both the seller and the Colorado Department of Revenue, are necessary steps in the exemption process. Understanding the nuances of this form can significantly benefit businesses looking to optimize their tax obligations while ensuring compliance with state regulations.
DR 1191 (12/02)
COLORADO DEPARTMENT OF REVENUE
TAXPAYER SERVICE
1375 SHERMAN ST. DENVER, CO 80261 (303) 238-SERV (7378)
SALES TAX EXEMPTION ON
PURCHASES OF MACHINERY AND MACHINE TOOLS
Seller
Colorado Sales Tax Account
Number
Address
City
State
ZIP
Purchaser
Date of Purchase
Amount of Purchase
Is Equipment
Leased
Purchased
Description of Item(s) Including Machine Parts
How Used in Manufacturing
End Product
How Sold
Wholesale
Retail
New
Used
THIS SECTION IS FOR BUSINESSES LOCATED IN ENTERPRISE ZONES
(SEE INSTRUCTIONS ON REVERSE SIDE)
Amount of Purchase for Machinery, Machine Tools and Parts
Materials used in the construction of machinery and machine tools (after 06/07/89)
I hereby certify that __________________________________________________________________ is
(Name of Purchasing Firm or Person)
entitled to the exemption on purchases of machinery or machine tools.
By (Authorized Signature of Purchasing Firm)
Title
DR 1191 INSTRUCTIONS
GENERAL INFORMATION
Purchases of machinery or machine tools and parts thereof are exempt from state sales and use tax when the machinery will be used in manufacturing. [C.R.S. 39-26-114(11)].
To qualify the machinery must:
•Be used in Colorado,
•Be used directly and predominantly to manufacture tangible personal property for sale or profit.
•Be of a nature that would have qualified for the federal investment tax credit under the definition of section 38 property found in the Internal Revenue Code of 1954, as amended. This includes tangible personal property with a useful life of one year or more and limits qualifying purchases of used equipment to a maximum of $150,000 annually,
•Be included on a purchase order or invoice totaling more than $500,
•Be capitalized.
ENTERPRISE ZONES
The manufacturing exemption is expanded to exempt additional purchases from sales and use tax when machinery is used solely and exclusively in an enterprise zone. Equipment that is used both within and outside an enterprise zone only qualifies for the regular statewide exemption, as is equipment used at a location prior to that location’s designation as an enterprise zone. [C.R.S. 39-30-106(1)]
•Machinery used solely and exclusively in a designated enterprise zone may be capitalized or expensed to qualify for the exemption.
•Materials for construction or repair of machinery or machine tools are exempt from the state sales and use tax if the machinery is used exclusively in an enterprise zone.
•Mining operations are included in the definition of manufacturing when performed in an enterprise zone. For further information, see FYI Sales 69, “Enterprise Zone Exemption for Machinery and Machine Tools Used in Mining.”
LOCAL TAXES
Cities, counties and special districts may or may not exempt manufacturing equipment from local sales taxes. Refer to publication DRP1002 for a list of localities that exempt this equipment from local tax. Special districts that impose sales tax on manufacturing equipment cannot impose use tax on the equipment.
CLAIMING THE EXEMPTION
Complete Form DR 1191 Sales Tax Exemption on Purchases of Machinery and Machine Tools. Give one copy of the completed form to the seller of the machinery and a second copy to the Department of Revenue. The purchaser must also keep a copy. An exemption cannot be claimed for sales tax paid in another state which is credited against Colorado sales or use tax. NOTE: Acceptance of this certificate by the seller removes any sales tax liability from the seller and the purchaser is liable for any subsequent sales or use tax liability for the purchase.
For further information regarding the manufacturing exemption, see FYI Sales 10 available on our Website at WWW.TAXCOLORADO.COM, or call (303) 238-SERV (7378).
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