Colorado Legislative Council Staff



Drafting Number:

Prime Sponsor(s):

LLS 99-0173

Rep. Hagedorn

Sen. Chlouber


Bill Status:

Fiscal Analyst

January 16, 1999

House Finance

Harry Zeid (303 866-4753)



Fiscal Impact Summary

FY 1999/2000

FY 2000/2001

State Revenues

General Fund



State Expenditures

General Fund



FTE Position Change

0.0 FTE

0.0 FTE

Other State Impact: TABOR Impact

Effective Date: July 1, 1999

Appropriation Summary for FY 1999-2000: None

Local Government Impact: None

Summary of Legislation

            This bill provides for a refund of state sales and use tax paid in connection with film production in Colorado. Specifically, any production company that engages in production activities in the state during any calendar year that spends at least $1.0 million on production goods and services used in production activities during the calendar year would be eligible to claim a refund. If a production company’s production activities in Colorado relate solely to commercial advertising productions and the production company spends at least $250,000 on production goods and services used in production activities during the calendar year, the company would be eligible to claim a refund of the state sales and use tax paid. A refund would not be allowed on goods and services that the production company also uses for other purposes within the 12 month period following the date of purchase.

            Production goods and services that would qualify for the sales tax refund include items of tangible personal property purchased or leased in Colorado or purchased or leased from an out-of-state vendor by a production company and used in production activities in Colorado. Qualified services include services purchased by a production company that are necessary for or related to production activities in the state, including lodging and on-site catered meals.

            The production company is required to claim the refund by April 1 of the calendar year following the calendar year for which the refund is claimed. In order to claim the refund, a production company must register with the Motion Picture and Television Advisory Commission prior to the date of filing an application for the refund. No registration fee may be charged by the Commission.

            The bill would become effective July 1, 1999, and would apply to purchases made and leases entered into by production companies on or after that date.

State Revenues

            Arizona enacted similar legislation, that took effect beginning in calendar year 1996. Arizona authorizes a 50 percent refund of sales tax paid. The state sales tax rate in Arizona is 5.0 percent. Arizona provided four refunds in CY 1996 for $170,000, and three refunds in CY 1997 for $310,000. CY 1998 data is not available due to the time period allowed for filing refunds.

            The Arizona experience implies that nearly $20 million of goods and services were purchased that qualified for the state tax refund over the two year period. Assuming that Colorado has a similar rate of participation, it is anticipated that annual refunds will be approximately $290,000 ($10 million in qualified purchases multiplied by the effective state sales tax rate of 2.9 percent {3.0 percent sales tax rate less the vendor’s discount of 3.33 percent of sales tax collections}= $290,000 refund annually. The actual amount of refunds that are applied for may be higher or lower than this amount, depending on the desirability of Colorado as a movie production location and the amount of qualified production goods and services purchased for Colorado production activities.

State Expenditures

            The Department of Revenue will not require additional resources to process refund requests due to the anticipated low volume of refund claims. The limited audit impact resulting from the refund will be absorbed within the existing resources of the Tax Compliance and Audit Division.

Other State Impacts

            Under current law, SB97-1 requires the diversion of 10 percent of sales tax revenues to the Highway User Tax Fund for use on highway projects. This bill will reduce state sales tax revenues beginning in FY 1999-00, and will therefore, reduce the amount of state funds available for the SB 97-1 diversion. Additionally, the reduced state revenues will mean a reduction of the amount of state funds required to be refunded to taxpayers under the terms of TABOR, and less state funds will be available for capital construction needs.

Local Government Impact

            Local governments will not be directly affected by the bill.

State Appropriations

            The fiscal note would imply that no new state appropriations or spending authority are required to implement the provisions of the bill in FY 1999-00.

Departments Contacted


            Revenue          Local Affairs

Omissions and Technical or Mechanical Defects

            The bill contains an effective date of July 1, 1999. The annual amount spent on production goods and services used for film production activities in Colorado are based on a calendar year amount. The first year impact will be based on six months of production company purchases.