.png){kind=logo}
DENVER, CO – Governor Jared Polis signed legislation yesterday to support working people and small businesses after Congress passed H.R. 1, which granted massive tax breaks to corporations while raising taxes on working families in Colorado.
HB26-1223, sponsored by Senators Matt Ball, D-Denver, and Dylan Roberts, D-Frisco, Speaker Pro Tempore Andy Boesenecker, D-Fort Collins, and Representative Steven Woodrow, D-Denver, repeals Colorado’s downloadable software exemption to ensure taxes on these products are consistent, no matter how or where they are purchased, funding tax credits for working families and providing relief to Colorado restaurants.
“Before this law, software products were taxed differently depending on where they were purchased,” said Ball. “It was a patchwork system that simply didn’t make sense with the current way we make purchases in our modern, online society. By fixing this discrepancy, we’re putting money back into the hands of Colorado families and supporting restaurants.”
“We’re repealing a tax exemption to ensure Colorado law is being equally applied, no matter your zip code,” said Boesenecker. “By modifying our tax code, we can put money back into the pockets of hardworking Coloradans and support local restaurants. Our law creates a new tax credit for hardworking families to make our state more affordable.”
“This is a win-win-win for hardworking Coloradans, for local restaurants, and for modernizing our tax code,” said Roberts. “It is narrowly focused on one outdated statute that taxes software differently based on where and how it is purchased. By standardizing this inconsistency, we are funding tax credits that give hardworking Coloradans a chance to get ahead and give Colorado restaurants a much-needed boost by relieving them of sales tax burdens."
“Colorado Democrats are making tax policy changes to put money back into the pockets of hardworking families,” said Woodrow. “Taxes on downloadable software should be applied the same, regardless of how it is purchased. This will help create a more equitable tax code that puts hardworking people first.”
The Colorado Office of the State Auditor reported that the antiquated sales tax exemption for certain downloadable software was being applied unevenly across the state, with 14 percent of vendors not applying the exemption at all.
With part of the revenue generated from closing this exemption, the law creates a new tax credit for hardworking families. The Family Affordability Credit (FAC) will go to families who would be eligible for the highly successful Family Affordability Tax Credit (FATC) in current law. That credit is temporarily deactivated due to the corporate tax cuts in H.R. 1. Estimates show families could receive up to $260 for each child under age six and up to $195 for each child between six and 16 because of HB26-1223.
The law also funds tax relief for restaurants through a temporary sales tax deduction and permanent expansion of a utility tax deduction. In 2027 and 2028, for July, August, November, and December, restaurants, bars, and other food vendors will retain the state sales tax collected on up to $14,000 of taxable sales in that month. Additionally, before this law, certain restaurants were allowed to subtract 55 percent of their energy bills from their tax obligations. The law permanently expands this to allow restaurants to deduct 100 percent of gas and electricity purchases from their taxable sales.