Use Tax on Construction Materials

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Construction Use Tax Requirements

The City of Loveland requires that use tax be paid on construction and building materials used or consumed in Loveland.

Use tax can be paid at the time a permit is obtained. Use tax is calculated based on 50% of the general contract and/or mechanical contracts costs. The use tax paid on a permit is an estimate and/or a deposit.

Who's Responsible For Paying Use Tax to the City of Loveland?

Generally, the general contractor will pay a use tax deposit at the time the permit is issued. The Building Division will work with contractors, homeowners, and builders to determine building valuation and will collect both city construction use tax at 3.0%, and 0.80% for Larimer County use tax with the permit fees. Use tax is based on 50% of the valuation x 3.80% for the use tax deposit.

The City of Loveland is actively involved in providing the highest quality of service to the builders, businesses and citizens of our city. As part of that service, we would like to inform you that a process exists to help you reconcile the deposit for the building use tax due paid at the time of permit with the actual amount due on your project with the City.

Building Use Tax Deposit

Section 3.16.160 of the City of Loveland Sales/Use Tax Code allows contractors to pay a use tax deposit (estimate of tax due) at the time of permit. Under the Building Use Tax Deposit method, the tax is calculated based on the valuation determined for a project.

Every construction project in the city is subject to audit for a period of up to three years after the Certificate of Occupancy has been issued. The audit process typically reconciles the actual tax due to the amounts paid as an estimate.

Reconciliation Process

When reconciling the permit, the contractor must list the actual total costs (as allocated between materials and labor) which are shown on the invoices. The reconciliation should indicate the taxable materials, taxable subcontractor costs, other taxable items (i.e. rentals), non-taxable items, and sales taxes (Colorado, Larimer County, Loveland City Sales Tax, and other taxes). If an invoice does not show an allocation between material and labor, and the invoice appears to involve labor and material, the entire invoice may be considered as 100% taxable material.

If the invoice is considered to be smaller, does not show an allocation between labor and materials (and it appears that materials and labor are involved), then the City of Loveland may accept the estimated 50% materials-50% labor allocation as a reasonable allocation, making the assumption that this allocation will balance out when combining all of the smaller invoices.
The City of Loveland may request invoices or additional information on any item listed on the final reconciliation, and will request invoices and/or send out subcontractor affidavits for larger invoices involving items such as flooring, cabinets, appliances, granite, etc. Please note that fabrication labor (labor that results in the creation or production of an article of tangible personal property, or that is a step in a process or series of operations resulting in the creation or production of the article) is considered to be a part of the taxable materials. Installation labor to install an existing product is not part of the materials.

To help facilitate the process, the City provides information and forms to be completed by you and submitted to the City that provide the required information about the costs of the project.

As the general contractor, if your project valuation is greater than $250,000, please complete these forms and send them to the City within 90 days of the completion of your project. If your project valuation is less than $250,000, you may request a reconciliation, but it is not currently required. The City will review the information and let you know if additional information is needed, or if the information provided is sufficient to reconcile the deposit paid with the actual amount due.

Forms

Instructional Video: Everything You Need to Know about the JCR Process

Construction Use Tax PowerPoint

Job Cost Reconciliation Blank Form

Job Cost Reconciliation w/Categories

Subcontractor Affidavit

Request for Refund

Below are the descriptions of the worksheets located in the JCR/Construction Use Tax form:

Job Cost Ledger: Used to record costs incurred by the general contractor for materials directly purchased, and including subcontractor costs not reported on subcontractor affidavits. This detail normally includes direct material purchases (taxable), along with engineering, permit fees, design fees, overhead, and (non-taxable). Enter invoice total, amount of taxable materials, taxable other (equipment, trailer rentals, shipping, etc.). Any sales tax paid on materials for City of Loveland should be included for credit of sales tax paid. It is important that all materials and fees are included, as the total of all costs for listed on use tax reconciliation will be compared to the total costs of the project and original valuation.
Net Tax Refund Due: This worksheet is used to summarize the materials costs from the Job Cost Ledger, and the subcontractor material costs from the Materials and Sub Listing. Entry of original valuation, tax paid on estimated materials amount (50%), and Actual materials from both the Job Cost Ledger and the Materials and Sub Listing will give you the final City sales tax amount for the project, and net tax due or refund due amount.

Once this data is entered on the form, please e-mail, or feel free to visit at the Civic Center Building, 500 East Third St., Suite 110, Finance Department, Sales Tax Division. Notifications of either taxes or refunds due will be processed as timely as is possible.

Any questions regarding the completion of these worksheets should be directed to:

Pamela Hemingway, Construction Use Tax Specialist
970.962.2702

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