Back-to-School Sales Tax Holiday

Second Regular Session Seventy-fifth General Assembly STATE OF COLORADO INTRODUCED HOUSE BILL 26-1048 LLS NO. 26-0536.01 Sam Anderson x4218 HOUSE SPONSORSHIP Winter T., SENATE SPONSORSHIP Pelton B., Carson House Committees Senate Committees Finance A BILL FOR AN ACT CONCERNING A SALES AND USE TAX HOLIDAY FOR BACK-TO-SCHOOL ITEMS.

Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://leg.colorado.gov.) Section 1 of the bill creates a time-limited state sales and use tax exemption (tax holiday) for back-to-school items. The tax holiday applies to the last weekend of July 2027 and reoccurs at approximately the same time in 2028 and 2029. A "back-to-school item" means an article of clothing, a school supply, or a learning aid that is purchased primarily for use by an individual who is under 21 years old. The exemption for each Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.

Capital letters or bold & italic numbers indicate new material to be added to existing law. Dashes through the words or numbers indicate deletions from existing law.

item is limited by cost as follows: ! $100 for an article of clothing; ! $50 for a school supply; and ! $30 for a learning aid. Section 2 permits a town, city, or county to create a tax holiday for back-to-school items that is identical to the state tax holiday.

Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, add 39-26-735 as follows: 39-26-735. Back-to-school items - tax preference performance statement - rules - legislative declaration - definitions - repeal. (1) IN ACCORDANCE WITH SECTION 39-21-304 (1), WHICH REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY LEGISLATIVE DECLARATION, THE GENERAL ASSEMBLY HEREBY FINDS AND DECLARES THAT:

(a) THE GENERAL LEGISLATIVE PURPOSE OF THE EXEMPTION ALLOWED BY THIS SECTION IS TO PROVIDE TAX RELIEF TO CERTAIN INDIVIDUALS;

(b) THE SPECIFIC LEGISLATIVE PURPOSE OF THE EXEMPTION ALLOWED BY THIS SECTION IS TO INCREASE THE AFFORDABILITY OF BACK-TO-SCHOOL ITEMS AND TO REDRESS THE BURDEN THAT THE IMPOSITION OF SALES TAX PLACES ON MILLIONS OF PARENTS AND OTHER CAREGIVERS FOR YOUNG CHILDREN IN COLORADO FOR WHOM SUCH BACK-TO-SCHOOL ITEMS ARE ESSENTIAL; AND

(c) TO ALLOW THE GENERAL ASSEMBLY AND THE STATE AUDITOR TO MEASURE THE EFFECTIVENESS OF THE EXEMPTION ALLOWED BY THIS SECTION, THE STATE AUDITOR, IN COLLABORATION WITH THE DEPARTMENT PURSUANT TO SUBSECTION AVAILABLE DATA SOURCES AND ESTIMATE THE SAVINGS THAT THE EXEMPTION FOR BACK-TO-SCHOOL ITEMS PROVIDES TO TAXPAYERS IN COLORADO FOR WHOM BACK-TO-SCHOOL ITEMS ARE ESSENTIAL DURING THE STATE AUDITOR'S EVALUATION OF THE EXEMPTION PURSUANT TO

SECTION 39-21-305.

(6) OF THIS SECTION, SHALL IDENTIFY

(2) AS USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE REQUIRES:

(a) "BACK-TO-SCHOOL ITEM" MEANS AN ARTICLE OF CLOTHING, A SCHOOL SUPPLY, OR A LEARNING AID THAT IS PURCHASED PRIMARILY FOR USE BY A MINOR.

(b) "CLOTHING" MEANS:

(I) ANY ARTICLE OF APPAREL INTENDED TO BE WORN ON AN INDIVIDUAL, EXCLUDING A CLOTHING ACCESSORY; AND

(II) ANY FOOTWEAR, EXCLUDING SKIS, SNOWBOARDS, SWIM FINS, ROLLER BLADES, SKATES, AND OTHER RECREATIONAL EQUIPMENT.

(c) "CLOTHING ACCESSORY" MEANS AN INCIDENTAL ITEM WORN ON AN INDIVIDUAL OR USED IN CONJUNCTION WITH CLOTHING. "CLOTHING ACCESSORY" INCLUDES JEWELRY, WALLETS, WATCHES, HATS, SCARVES, HOSIERY, TIES, BELTS, AND UMBRELLAS.

(d) "DEPARTMENT" MEANS THE DEPARTMENT OF REVENUE.

(e) "EXECUTIVE DIRECTOR" MEANS THE EXECUTIVE DIRECTOR OF THE DEPARTMENT.

(f) "LEARNING AID" MEANS A BOOK OR TOY INTENDED TO TEACH SKILLS TO CHILDREN, INCLUDING A SET OF STACKING OR NESTING BLOCKS, FLASH CARDS OR OTHER LEARNING CARDS, A MATCHING OR MEMORY GAME, A PUZZLE BOOK OR A SEARCH-AND-FIND BOOK, OR AN INTERACTIVE OR ELECTRONIC BOOK.

(g) "SCHOOL SUPPLY" MEANS AN ART SUPPLY, BACKPACK, BINDER POCKET, BINDER, BLACKBOARD CHALK, CALCULATOR, CELLOPHANE TAPE, CLAY AND GLAZE, COMPASS, COMPOSITION BOOK, CRAYON SET, DICTIONARY OR THESAURUS, DRY ERASE MARKER AND ERASER, FOLDER, GLUE AND PASTE, HIGHLIGHTER, INDEX CARD SET AND BOX, LUNCH BOX, MAP OR GLOBE, MARKER, NOTEBOOK AND DIVIDER, PAPER OR PAD, PENCIL BOX OR OTHER BOXES FOR SCHOOL SUPPLIES, PENCIL SHARPENER, PENCIL AND ERASER, PEN, PROTRACTOR, REFERENCE BOOK, RULER, SCISSORS, TEXTBOOK, OR WORKBOOK.

(3) (a) COMMENCING WITH THE FORTY-EIGHT-HOUR PERIOD BEGINNING AT 11:59 P.M. ON JULY 23, 2027, AND ENDING AT 11:59 P.M. ON JULY 25, 2027, AND FOR THE FORTY-EIGHT-HOUR PERIODS BEGINNING AT 11:59 P.M. ON JULY 28, 2028, AND ENDING AT 11:59 P.M. ON JULY 30, 2028, AND BEGINNING AT 11:59 P.M. ON JULY 27, 2029, AND ENDING AT 11:59 P.M. ON JULY 29, 2029, THE SALE OF BACK-TO-SCHOOL ITEMS PRICED LESS THAN THE LIMIT ESTABLISHED IN SUBSECTION (3)(b) OF THIS SECTION IS EXEMPT FROM THE SALES TAX LEVIED PURSUANT TO PART 1 OF THIS ARTICLE 26.

(b) THE LIMIT FOR EACH BACK-TO-SCHOOL ITEM IS:

(I) ONE HUNDRED DOLLARS FOR AN ARTICLE OF CLOTHING;

(II) FIFTY DOLLARS FOR A SCHOOL SUPPLY; AND

(III) THIRTY DOLLARS FOR A LEARNING AID.

(4) THE STORAGE, USE, OR CONSUMPTION OF A BACK-TO-SCHOOL ITEM THAT IS EXEMPT AT THE TIME OF PURCHASE FROM SALES TAX PURSUANT TO SUBSECTION (3) OF THIS SECTION IS EXEMPT FROM THE USE TAX LEVIED PURSUANT TO PART 2 OF THIS ARTICLE 26.

(5) THE EXECUTIVE DIRECTOR MAY:

(a) MODIFY EXISTING FORMS OR CREATE NEW FORMS AS NECESSARY TO FACILITATE THE EXEMPTION CREATED IN THIS SECTION;

AND

(b) ADOPT RULES FOR THE ADMINISTRATION AND ENFORCEMENT OF THIS SECTION.

THE DEPARTMENT, IN CONSULTATION WITH THE STATE AUDITOR, SHALL COLLECT THE INFORMATION NECESSARY FOR THE STATE AUDITOR TO MEASURE THE EFFECTIVENESS OF THE EXEMPTION CREATED IN THIS SECTION AS REQUIRED BY SUBSECTION (1)(c) OF THIS SECTION.

(7) THIS SECTION IS REPEALED, EFFECTIVE DECEMBER 31, 2033.

SECTION 2. In Colorado Revised Statutes, 29-2-105, amend (1) introductory portion, (1)(d)(I)(T), and (1)(d)(I)(U); and add (1)(d)(I)(V) as follows:

29-2-105. Contents of sales tax ordinances and proposals.

(1) The sales tax ordinance or proposal of any incorporated town, city, or county adopted pursuant to this article 2 shall MUST be imposed on the sale of tangible personal property at retail or the furnishing of services, as provided in subsection (1)(d) of this section. Any countywide or incorporated town or city sales tax ordinance or proposal shall MUST include the following provisions:

(d) (I) A provision that the sale of tangible personal property and services taxable pursuant to this article 2 is the same as the sale of tangible personal property and services taxable pursuant to section 39-26-104, except as otherwise provided in this subsection (1)(d). The sale of tangible personal property and services taxable pursuant to this article 2 is subject to the same sales tax exemptions as those specified in part 7 of article 26 of title 39; except that the sale of the following may be exempted from a town, city, or county sales tax only by the express inclusion of the exemption either at the time of adoption of the initial sales tax ordinance or resolution or by amendment thereto:

(T) The exemption for sales of heat pump systems and heat pump water heaters set forth in section 39-26-732; and (U) The exemption for sales of energy storage systems set forth in section 39-26-733; AND

(V) THE EXEMPTION FOR BACK-TO-SCHOOL ITEMS SPECIFIED IN

SECTION 39-26-735 (3), FOR THE SAME PERIODS THAT THE STATE EXEMPTION IS AVAILABLE.

SECTION 3. Act subject to petition - effective date. This act takes effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly; except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2026 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.