Fort Collins exempts a short list of goods from its 4.35% city sales tax, taxes groceries at a reduced 2.25% rate, and allows government agencies and qualifying 501(c)(3) organizations to make tax-free purchases when they hold a valid exemption certificate and pay directly from their own funds. The rules for sales tax exempt sales in Fort Collins sit in Chapter 25 of the Municipal Code, and because the city collects its own tax rather than routing it through the state, a purchase that qualifies for a city exemption may still be taxable at the state and county level, or vice versa.1Colorado Department of Revenue – Taxation. Local Government Sales Tax – Section: Self-Collecting Home-Rule Cities
Goods That Are Exempt or Taxed at a Reduced Rate
Some exemptions attach to the item itself, so they apply automatically at checkout without any certificate or paperwork from the buyer. Fort Collins Municipal Code Section 25-73 sets these out.
Groceries
Food purchased for home consumption is not fully exempt. It is taxed at a reduced city rate of 2.25% instead of the standard 4.35%.2City of Fort Collins. Sales Tax The reduced rate covers groceries you take home and prepare yourself. Prepared food sold hot, or meals served with utensils, stays fully taxable. Deli counters and convenience stores can blur the line; the test is whether the seller heated the item or handed you utensils with it.
Medical Items
Prescription drugs dispensed by a licensed pharmacist, prosthetic devices, and medical oxygen with its related delivery equipment are fully exempt from the city sales tax under Section 25-73. No certificate is required. The exemption follows the nature of the item, so the pharmacy or supplier simply does not charge the tax.
Newspapers and Residential Utilities
Newspapers published and distributed at regular intervals are exempt. Electricity, coal, and gas used for residential lighting and heating are also exempt. The utility exemption is residential only, so commercial and industrial energy use remains taxable.
Who Can Buy Tax-Free
Beyond specific products, the identity of the buyer can remove the tax entirely. Fort Collins recognizes two main categories.
Government Entities
Purchases by the United States government, the State of Colorado and its agencies, the City of Fort Collins, and other governmental subdivisions are exempt when the purchase serves an official public function. The purchase has to be for public use, not for the personal benefit of an employee.
Charitable and Religious Organizations
Organizations that hold federal tax-exempt status under Section 501(c)(3) of the Internal Revenue Code can qualify for a Fort Collins exemption on goods and services reasonably connected to their regular charitable activities.3Colorado Department of Revenue. DR 0715 Application for Exempt Entity Certificate The organization must hold a valid exemption certificate and present it to the vendor at the time of purchase. The city will not go back and remove tax from a transaction where the certificate was not provided at checkout.
Rules That Trip Up Exempt Buyers
Qualifying for the exemption is only half the job. How the purchase is paid for matters just as much.
The general rule is that the transaction must be a direct expenditure from the organization’s own funds. If an employee pays out of pocket and asks for reimbursement later, the sale is taxable, because the vendor had no way to verify exempt status at the register. Colorado’s DR 0715 application carries one exception: purchases totaling less than $250 do not need to come directly from organizational funds to qualify.3Colorado Department of Revenue. DR 0715 Application for Exempt Entity Certificate At $250 and above, the organization must pay directly.
Hand the vendor your certificate every time. The vendor will keep a copy. If the exemption is later found invalid, the organization, not the vendor, owes the tax, interest, and any penalties.
How to Apply for an Exemption
Applying is a two- or three-step process depending on whether you already have federal status. Do the federal step first, because both Colorado and Fort Collins build on it.
Confirm Your Federal 501(c)(3) Status
You need a current IRS determination letter before anyone else will consider your application. You can check your status through the IRS Tax Exempt Organization Search, which shows determination letters, Form 990 filings, and any automatic revocations.4Internal Revenue Service. Tax Exempt Organization Search If your organization appears on the automatic revocation list, resolve that with the IRS first. The IRS automatically revokes exempt status from any organization that fails to file its required annual return for three consecutive years.5Internal Revenue Service. Annual Filing and Forms
File Form DR 0715 With the State
Qualifying organizations submit Form DR 0715 (Application for Exempt Entity Certificate) to the Colorado Department of Revenue. There is no fee, and the state certificate does not expire once issued.6Department of Revenue – Taxation. Certificates of Exemption – Section: Exempt Certificate for Non-profit, Charitable, School, Religious, or Government Organizations All valid Colorado nonprofit exemption numbers begin with 98 or 098. The application asks for your legal name, Federal Employer Identification Number, a copy of the IRS determination letter, a description of your charitable activities, and an explanation of what you plan to buy tax-free.
File With the City of Fort Collins
Because Fort Collins collects its own tax, you may also need to file separately with the city’s Sales Tax Division. The city publishes an Affidavit for Exempt Sales on its website.2City of Fort Collins. Sales Tax You can submit through the city’s online portal at MuniRevs or by mail. The online system issues a confirmation number; hold onto it as proof of filing until the formal certificate arrives. Processing takes time, so apply before you need to make exempt purchases.
Don’t Forget Use Tax
Fort Collins also imposes a use tax at 4.35%, the same rate as its sales tax. Use tax applies when you buy something from a seller who did not collect Fort Collins sales tax, usually an out-of-state or online vendor, and then store, use, or consume the item in the city.7MuniRevs. Frequently Asked Questions
The same exemptions carry over. If a purchase would have been exempt from city sales tax under Section 25-73 or Section 25-74, it is also exempt from use tax. Prescription drugs shipped from an out-of-state pharmacy, for example, stay exempt. But taxable office furniture bought online from a seller who did not collect the city tax creates a use tax obligation that you have to self-report. Businesses with a Fort Collins sales tax license report use tax on the same return. Individuals should contact the city’s Sales Tax Division for filing instructions.
Penalties for Misusing an Exemption
An organization that buys goods tax-free under its certificate but uses them for non-exempt purposes remains directly liable for the unpaid tax, plus interest at 1% per month from the date the tax was originally due.3Colorado Department of Revenue. DR 0715 Application for Exempt Entity Certificate Negligent underpayment can add a 10% penalty on top of the deficiency, and intentional evasion can push that penalty to 50%.
The simplest way to stay clear of trouble is to limit tax-free purchasing to goods directly tied to your charitable mission, document how each purchase serves that purpose, and keep your federal 501(c)(3) status in good standing. Lose the federal status and the local exemption falls with it.