HOUSE 3rd Reading Unamended May 4, 2015 HOUSE 2nd Reading Unamended May 1, 2015First Regular Session Seventieth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 15-1073.01 Gregg Fraser x4325 HOUSE BILL 15-1386 HOUSE SPONSORSHIP Singer and Priola, Windholz, Rankin, Esgar, Ginal, Melton, Primavera, Roupe, Willett, Williams SENATE SPONSORSHIP Scott and Heath, House Committees Senate Committees Finance Appropriations A BILL FOR AN ACT Concerning the state sales and use tax treatment of equipment used for waste diversion or recycling, and, in connection therewith, aligning the sales and use tax treatment of equipment used for waste diversion or recycling with the sales and use tax treatment of machinery and machine tools used in manufacturing tangible personal property. 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://www.leg.state.co.us/billsummaries.) Under current law, machinery and machine tools used in manufacturing tangible personal property are exempt from the state sales and use tax; however, equipment used for waste reduction or recycling purposes is not. For the calendar year 2015, the bill allows a taxpayer who operates a recycling or composting facility that submits a recycling or composting facility annual report to the department of public health and environment to apply for a refund of any state sales tax or use tax paid for waste reduction or recycling equipment. The bill specifies the types of equipment to which the refund applies and specifies procedures for applying to the department of revenue to receive the refund. For the calendar years 2016 and 2017, the refund is changed from a refund to a sales and use tax exemption. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Legislative declaration. (1) The general assembly hereby finds and declares that: (a) Machinery and equipment used in the traditional manufacturing process are currently exempt from the state sales and use tax; (b) Because recycling and reprocessing waste products use different methods to acquire, process, and transport needed materials, much of the machinery and equipment used in the recycling and reprocessing industry does not receive the same sales and use tax treatment as other equipment used in traditional manufacturing; (c) Recycling is the process of extracting and remanufacturing discarded resources; and (d) The intended purpose of the tax refund and exemption created in this section is to: (I) Treat machinery and equipment used by a recycling facility or composting facility in the recycling and reprocessing of waste products the same as machinery and equipment used in the traditional manufacturing process for state sales and use tax purposes; and (II) Allow for-profit recyclers to have the same ability to purchase equipment without sales and use tax that manufacturers, governmental entities, and other recyclers have, in order to: (A) Preserve and create new jobs in Colorado in the recycling, and reprocessing industries; (B) Secure a robust and reliable source of local materials and supplies for recycled materials processors and manufacturers in the state; (C) Ensure that recyclable materials are recycled in the state rather than shipped to other states or countries for remanufacturing; (D) Develop the recycled materials processing and manufacturing industries in the state to provide additional economic benefits to the state that are currently being lost to other states; and (E) Encourage the diversion of additional useful recyclable materials from landfill sites in the state. SECTION 2. In Colorado Revised Statutes, add 39-26-709.5 as follows: 39-26-709.5. Waste reduction or recycling equipment - refund - exemption - definitions. (1) (a) For the 2015 calendar year, a taxpayer that operates a recycling facility or a composting facility that submits a recycling facility annual report or composting facility annual report to the department of public health and environment in connection with the department of public health and environment's activities conducted pursuant to section 30-20-122 (1) (a) (V), C.R.S., is allowed to claim a refund of all state sales and use taxes levied pursuant to parts 1 and 2 of this article upon the storage, use, consumption, or sale of any waste reduction or recycling equipment. (b) To claim the refund allowed by paragraph (a) of this subsection (1), a taxpayer must submit a refund application to the department of revenue, on a form provided by the department, no later than April 1, 2016. Along with the application, the taxpayer must provide proof of the state sales and use taxes paid by the taxpayer in 2015. A taxpayer must also provide any additional information with the application that the department requires by rule, which may include, without limitation, a detailed list of the machinery or equipment and uses thereof that support a claim for a refund, the name and address of an individual who maintains records of such information, and a statement that the taxpayer agrees to furnish records confirming such information to the department upon request. The department shall not refund any moneys to a taxpayer unless the taxpayer has complied with this subsection (1). (2) (a) For the 2016 and 2017 calendar years, a taxpayer that operates a recycling facility or a composting facility that submits a recycling facility annual report or composting facility annual report to the department of public health and environment in connection with the department of public health and environment's activities conducted pursuant to section 30-20-122 (1) (a) (V), C.R.S., is exempt from all state sales and use taxes levied pursuant to parts 1 and 2 of this article upon the storage, use, consumption, or sale of any waste reduction or recycling equipment. (b) To receive an exemption under this subsection (2), a declaration of entitlement shall be filed by the purchaser with the vendor of the waste reduction or recycling equipment, and with the executive director of the department of revenue. (3) As used in this section, unless the context otherwise requires: (a) "Motor vehicle" means a vehicle as defined in section 42-1-102 (58), C.R.S. (b) "Recovered materials" means those materials that have been separated, diverted, or removed from the waste stream for the purpose of recycling. (c) "Recycling" means any process by which waste or materials that would otherwise become waste are collected, separated, or processed and revised or returned for use in the form of raw materials or products, including composting. (d) "Recycling facility or a composting facility" does not mean a facility that engages in: (I) Any form of waste-to-energy process including but not limited to pyrolysis, gasification, plasma arc, or any other waste conversion technology; (II) The beneficial use of solid wastes as classified by the department of public health and environment, including the processing of biosolids and activities regulated under section 25-8-205 (1) (e), C.R.S.; or (III) Industrial recycling operations as classified by the department of public health and environment. (e) "Solid waste" means all putrescible and nonputrescible wastes in solid or semisolid form, including, but not limited to, yard or food waste, waste glass, waste metals, waste plastics, wastepapers, waste paperboard, and all other solid or semisolid wastes resulting from industrial, commercial, agricultural, community, and residential activities. (f) (I) "Waste reduction or recycling equipment" means new or used machinery or equipment that is operated or used exclusively in the state to collect, separate, process, modify, convert, or treat solid waste so that the resulting product may be used as a raw material or for productive use or to manufacture products containing recovered materials. "Waste reduction or recycling equipment" includes devices that are directly connected with or are an integral and necessary part of such machinery or equipment and are necessary for such collection, separation, processing, modification, conversion, or treatment. (II) "Waste reduction or recycling equipment" does not include a motor vehicle. SECTION 3. In Colorado Revised Statutes, 29-2-105, add (1) (d) (I) (O) as follows: 29-2-105. Contents of sales tax ordinances and proposals - repeal. (1) The sales tax ordinance or proposal of any incorporated town, city, or county adopted pursuant to this article shall be imposed on the sale of tangible personal property at retail or the furnishing of services, as provided in paragraph (d) of this subsection (1). Any countywide or incorporated town or city sales tax ordinance or proposal shall include the following provisions: (d) (I) A provision that the sale of tangible personal property and services taxable pursuant to this article shall be the same as the sale of tangible personal property and services taxable pursuant to section 39-26-104, C.R.S., except as otherwise provided in this paragraph (d). The sale of tangible personal property and services taxable pursuant to this article shall be subject to the same sales tax exemptions as those specified in part 7 of article 26 of title 39, C.R.S.; 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: (O) The exemption for sales of waste reduction or recycling equipment specified in section 39-26-709.5 (2), C.R.S. SECTION 4. 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 (August 5, 2015, if adjournment sine die is on May 6, 2015); 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 2016 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.