Construction Use Tax Requirements

The City of Loveland requires that Construction Use Tax be paid on construction and building materials used or consumed within Loveland City Limits according to Section 3.16.160 of the City of Loveland Sales/Use Tax Code.

• Construction Use Tax is an estimate and/or a deposit calculated based on 50% of the general contract and/or mechanical contracts costs and is paid at the time a permit is obtained.

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 of Loveland and Larimer County Construction Use Tax with the permit fees. Use tax is based on 50% of the valuation x 3.80% for the Use Tax deposit. 

City of Loveland Use Tax Rate = 3%

Larimer County Use Tax Rate = .80%

Total Use Tax Rate = 3.80%   

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 Construction Use Tax paid at the time of permit with the actual amount due on your project upon completion. To help facilitate the process, the City provides information and forms to be completed by you and submitted to the City. These forms allow you to provide the required information about the costs of the project.

Construction Use Tax Reconciliation is not required by the City of Loveland though every construction project in the City of Loveland 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.

Construction Use Tax 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 Job Cost Reconciliation form should indicate the total invoice cost, taxable materials, taxable subcontractor costs, other taxable items (i.e. rentals), non-taxable items, and sales taxes paid (State of 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 materials and labor appear to be 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 taxable materials.

Below is the description of the Job Cost Reconciliation (JCR) spreadsheet:

Job Cost Reconciliation (JCR) Form: This spreadsheet is used to record costs incurred by the general contractor for materials directly purchased, including subcontractor costs not reported on subcontractor affidavits. This detail normally includes direct, taxable material purchases, along with engineering, permit fees, design fees, overhead, and non-taxable costs such as labor and delivery. Enter invoice total, amount of taxable materials, taxable other (equipment, trailer rentals, etc.).  Also list sales taxes paid (State of Colorado, Larimer County, Loveland City Sales Tax, and other taxes). Any sales tax paid on materials to the City of Loveland will be credited to you toward the Use Tax due. It is important that all materials and fees are included, as the total of all costs listed on Use Tax reconciliation will be compared to the total costs of the project and its original valuation.     

• The bottom section of the worksheet (for Internal Use Only) is used to summarize the Original Valuation, Valuation for Tax, Actual Materials Cost, the difference between the Valuation and the Actual Materials Cost, the final City Use Tax amount for the project, and net tax due or refund due amount. The Job Cost Reconciliation (JCR) forms are linked below. You can choose a format with or without categories. There is also a link to a blank subcontractor affidavit.

Forms

• Instructional Video: Everything You Need to Know about the JCR Process - Under Review
• Construction Use Tax PowerPoint 
• Job Cost Reconciliation (JCR) With Categories
• Job Cost Reconciliation (JCR) Without Categories
• Subcontractor Affidavit

Once this data is entered on the form, please e-mail it along with the supporting documents, or feel free to visit the Civic Center Building, 500 East Third St., Suite 110, 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 forms should be directed to:

Pamela Hemingway, Construction Use Tax Specialist
970.962.2702

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