Big Sur Waterbeds v. City of Lakewood

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
October 4, 2018
2018COA147
No. 17CA1605 Big Sur Waterbeds v. City of Lakewood —
Taxation — Sales and Use Tax
The City of Lakewood imposes use tax on tangible personal
property purchased at retail and used in the city. The use tax does
not apply to wholesale purchases (i.e., purchases for resale to
others). A division of the Colorado Court of Appeals considers
whether Lakewood properly imposed use tax on certain purchases
of property by furniture retailers from furniture wholesalers.
Specifically, Lakewood assessed use tax on furniture that the
retailers displayed on their showroom floors for their customers to
peruse and try out. The retailers ultimately sold all displayed
furniture to customers, who paid Lakewood’s sales tax on the sales.
The division holds that Lakewood’s use tax does not apply to
the retailers’ purchases and minor use of the furniture for display
because the primary purpose of those purchases was to resell that
furniture. As a result, the division affirms the district court’s
judgment cancelling the tax assessments.
COLORADO COURT OF APPEALS 2018COA147
Court of Appeals No. 17CA1605
Jefferson County District Court No. 16CV30877
Honorable Laura A. Tighe, Judge
Big Sur Waterbeds, Inc.; Denver Mattress Company, LLC; and Sofa Mart, LLC,
Plaintiffs-Appellees,
v.
City of Lakewood, Colorado; and Larry Dorr, in his official capacity as Finance
Director of the City of Lakewood, Colorado,
Defendants-Appellants.
JUDGMENT AFFIRMED
Division VII
Opinion by JUDGE NAVARRO
J. Jones and Kapelke*, JJ., concur
Announced October 4, 2018
Silverstein & Pomerantz LLP, Neil I. Pomerantz, Mark E. Medina, Michelle
Bush, Denver, Colorado, for Plaintiffs-Appellees
Hoffman, Parker, Wilson & Carberry, P.C., M. Patrick Wilson, M. Keith Martin,
Denver, Colorado, for Defendants-Appellants
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2018.
¶1 Plaintiffs, Big Sur Waterbeds, Inc., Denver Mattress Co., LLC,
and Sofa Mart, LLC, purchase furniture (tax free) from wholesalers
worldwide and resell it in stores across the country, including in the
City of Lakewood. At each Lakewood store, plaintiffs provide a
showroom in which they display some furniture for customers to
peruse and try out. Plaintiffs also maintain warehouses, where
they store the bulk of their inventory. They ultimately sell all the
furniture — including the displayed furniture — and fill customer
orders from either the warehouses or the showrooms. Plaintiffs’
customers pay Lakewood’s sales tax on each purchase.
¶2 Lakewood assessed use tax on plaintiffs’ purchases of the
displayed furniture from 2012 to 2015, on the theory that plaintiffs
purchased the displayed furniture at retail for their own use in
advertising their products. Plaintiffs challenged the assessments in
the district court, which held a bench trial. They argued that, like
all the furniture they buy, they purchased the displayed furniture
at wholesale — that is, primarily for resale — and thus those
purchases were exempt from use tax. Employing the “primary
purpose” test from A.B. Hirschfeld Press, Inc. v. City and County of
Denver, 806 P.2d 917, 918-26 (Colo. 1991), the court agreed with
1
plaintiffs and cancelled Lakewood’s use tax assessments.
Addressing an issue of first impression, we also conclude that
plaintiffs purchased the displayed furniture primarily for resale.
Therefore, we affirm the judgment cancelling the assessments.
I. Standard of Review
¶3 We review de novo a district court’s interpretation of a tax
code. Leggett & Platt, Inc. v. Ostrom, 251 P.3d 1135, 1140 (Colo.
App. 2010). Generally, when interpreting tax provisions, we resolve
doubts in favor of the taxpayer. Noble Energy, Inc. v. Colo. Dep’t of
Revenue, 232 P.3d 293, 296 (Colo. App. 2010). When a taxpayer
claims a statutory exemption from taxation, however, we presume
that taxation is the rule and resolve doubts in favor of the taxing
authority. Id.
¶4 “Following a bench trial, we defer to a trial court’s factual
findings unless they are so clearly erroneous as to find no support
in the record.” Target Corp. v. Prestige Maint. USA, Ltd., 2013 COA
12, ¶ 24.
II. Lakewood’s Code and Regulations
¶5 Lakewood’s municipal code imposes a three percent use tax
“for the privilege of storing, using, or consuming in the City any
2
articles of tangible personal property or taxable services purchased
at retail.” Lakewood Mun. Code 3.01.210 (emphasis added). The
use tax does not apply if the purchaser has already paid sales tax
on the item, either to Lakewood or to another municipality, in an
amount equal to or greater than the amount of Lakewood’s tax. Id.
at 3.01.220(A)(1), (E).
¶6 “Retail sale” is defined as “all sales except wholesale sales
made within the city.” Id. at 3.01.020. A “[w]holesale sale” is “a
sale by wholesalers to retail merchants, jobbers, dealers, or other
wholesalers for resale and does not include a sale by wholesalers to
users or consumers not for resale . . . .” Id.
¶7 Consistent with the definitions of retail sale and wholesale
sale, the code also expressly exempts from use tax “the storage,
use, or consumption of any tangible personal property purchased
for resale in the city, either in its original form or as an ingredient of
a manufactured or compounded product, in the regular course of a
business.” Id. at 3.01.230(B).1
1 This code provision exempting property from use tax mirrors the
provision imposing use tax: both provide that use tax does not apply
to wholesale sales (i.e., purchases for resale). The parties disagree,
therefore, about whether this case presents a tax-imposition
3
¶8 Lakewood’s sales and use tax regulations supply guidance on
interpreting the code. See id. at 3.01.070 (“The City Council shall
adopt rules and regulations in conformity with this chapter for the
proper administration and enforcement of this chapter.”). One such
regulation explains that “[u]se tax is a complement to sales tax.”
Lakewood Sales and Use Tax Reg. 3.01.300(1)(b) (adopted June 24,
1985), https://perma.cc/2LGV-L4B7.2 Because sales tax is
imposed only on retail sales, which are sales to the user or
consumer of property or services sold, “use tax shall not apply to
the storage, use[,] or consumption of tangible personal property
purchased by a licensed retailer for resale within the regular course
of a business.” Id.
dispute (requiring doubts to be resolved against taxation) or a tax-
exemption dispute (requiring doubts to be resolved in favor of
taxation). We need not settle this disagreement. Even assuming
that plaintiffs claim an exemption, they should prevail because they
are clearly entitled to the exemption, as we will explain.
2 We apply this version of the regulations because it was admitted
into evidence at trial without objection. See Alpenhoff LLC v. City of
Ouray, 2013 COA 9, ¶ 10 (“[A]ppellate review extends only to those
[municipal] code provisions included in the record.”). While these
regulations have apparently been amended since their 1985
adoption, see Lakewood Sales and Use Tax Rules, Regs. & Special
Regs. (amended effective June 12, 1993 and revised Oct. 21, 1994),
https://perma.cc/SG2X-WV4L, the relevant regulatory language
discussed in this opinion has not changed.
4
¶9 Regulation 3.01.300(1)(b) also cautions, however, that
[t]angible personal property that was
purchased tax-free for resale or as an
ingredient of a manufactured or compounded
product and subsequently withdrawn from
stock for the purchaser’s own use or
consumption shall be taxed at the acquisition
cost of all materials. The tax liability attaches
at the time that the tangible personal property
is withdrawn from stock.
Id. (emphasis added).
¶ 10 In addition, a special regulation entitled “Initial Use of
Property” states:
Any item purchased for use or consumption by
the purchaser is subject to sales or use tax at
the time of purchase, even though the item
shall be resold later in either its original or
altered form. A tax-free purchase is taxable in
full at the first time it is used by the purchaser
for a nonexempt purpose.
(Example: A junkman may not buy a new car
tax-free under the theory that the car is going
to be junked someday and resold through his
business for scrap.)
Lakewood Sales and Use Tax Special Regs., at 41.
III. Purchased “At Retail” or “At Wholesale?”
¶ 11 Lakewood contends that plaintiffs’ “initial purchase and
subsequent use of display furniture is a taxable event.” According
to Lakewood, “all of [plaintiffs’] inventory purchases were initially
5
treated as exempt wholesale purchases for resale.” But “[l]ater,
when [plaintiffs] withdrew a portion of this wholesale inventory for
use as demonstration and promotion tools, the transactions in
which the display models were purchased were properly
recharacterized as taxable retail transactions.”
¶ 12 For its taxation theory, Lakewood relies on the Initial Use of
Property special regulation as well as regulation 3.01.300(1)(b).
Respectively, those regulations ask whether the displayed furniture
was (1) primarily purchased for use, not for resale; or (2) purchased
for resale initially but later withdrawn from stock for plaintiffs’ own
use (i.e., whether their placing the furniture on display revealed
that the primary purpose of their purchase was for their own use
rather than for resale). Because both regulations turn on plaintiffs’
primary purpose, we first look to the Hirschfeld test.
A. The Primary Purpose Test
¶ 13 In Hirschfeld, 806 P.2d at 918-26, the supreme court
considered use tax provisions from Denver’s tax code that are
nearly identical to Lakewood’s code. The supreme court explained
that, in assessing whether a purchase was made “at retail” or “for
resale,” courts should apply “a primary purpose” test. Id. at 921.
6
Under this test, “a purchase of an item of tangible personal property
is a purchase for resale and therefore not a purchase at retail if the
primary purpose of the transaction is the acquisition of the item for
resale in an unaltered condition and basically unused by the
purchaser.” Id. Five factors inform this determination:
1) “the actual conduct of a purchaser subsequent to a
disputed purchase,” id.;
2) “the nature of the purchaser’s contractual obligations,
if any, to use, alter[,] or consume the property to
produce goods or perform services,” id.;
3) “the degree to which the items in question are
essential to the purchaser’s performance of those
obligations,” id.;
4) “the degree to which the purchaser controls the
manner in which the items are used, altered[,] or
consumed prior to their transfer to third parties,” id.;
and
5) “the degree to which the form, character[,] or
composition of the items when transferred to third
parties differs from the form, character[,] or
7
composition of those items at the time they were
initially purchased,” id.
¶ 14 If, after considering these factors, a court concludes that the
purchaser acquired the property at issue primarily for resale in an
unaltered condition and basically unused, the use tax cannot apply
“even if the purchaser were to make minor use of the item.” Id.; see
also Coors Brewing Co. v. City of Golden, 2013 COA 92, ¶ 48
(concluding that Coors purchased scrap metal primarily for resale
even where it made “minor use” of the scrap during the
manufacturing process). This recognition that minor use does not
trigger a use tax comports with Lakewood’s code, which exempts
property purchased for resale even if it is used to some extent. See
Lakewood Mun. Code 3.01.230(B) (Use tax shall not apply to “the
storage, use, or consumption of any tangible personal property
purchased for resale . . . .”).
B. Additional Background
¶ 15 In each showroom, plaintiffs typically displayed samples of
each item of furniture available for purchase. They stored the rest
of their inventory in warehouses attached to the showrooms or in
larger distribution centers in Denver and Aurora. Customers
8
perusing the showrooms were invited to try out the furniture by, for
example, sitting on couches, turning on lamps, or lying on beds. At
all times, including at the time plaintiffs purchased the furniture
from wholesalers, plaintiffs intended to sell all the furniture —
including the displayed furniture.
¶ 16 Following a three-day bench trial, the district court made
extensive factual findings. It found that all of plaintiffs’ floor
furniture was always available for sale at the discretion of plaintiffs’
employees. Although employees generally preferred to fill orders
from the warehouses instead of from the showroom floors,
employees “often [sold] floor model items” in certain situations.
Those situations included
(a) when a customer indicate[d] an immediate
need for the item; (b) when the item on display
[was] discontinued or “rotated” pursuant to a
pre-determined schedule; (c) when the store
manager desire[d] to change the furniture
being displayed on the showroom floor;
(d) where the item on display [was] a one-of-a-
kind item (e.g., furniture using reclaimed
wood); (e) when the furniture on display [was]
needed to provide furniture to a customer who
received a damaged or defective item upon
delivery; and (f) where the item [was]
characterized as “home décor” or an accessory
item.
9
The court found that, when employees chose not to sell floor model
items, “it was not because these items were not for sale; it was
because they do not want to spend the time to replace a floor
model, and they ‘don’t like to have a gap on the floor’ that would
cause them to miss a sale.”
¶ 17 The court further found that displayed items remained on the
showroom floor for an average of six to twelve months. Roughly
40% of the displayed items were sold within the first six months,
and about 30% remained on the floor longer than one year. The
court explained that “[a]ll of [the] floor models are eventually sold,”
a fact Lakewood did not dispute.
¶ 18 Regarding price, the court determined that “floor model items
were often sold at full sales price where a customer exhibited an
immediate need for the item.” Also, “discounts up to 50% or more
were common on warehouse items and floor models alike.” Overall,
the court found “no meaningful difference between the frequency
and size of the discounts on floor models and the discounts on
warehouse items.”
10
¶ 19 As for tax treatment, “[plaintiffs] did not depreciate any of the
floor model items for income tax, accounting, or financial reporting
purposes.”
¶ 20 Of the plaintiffs, only Denver Mattress was obligated by
contract to take any action regarding the furniture. Denver
Mattress agreed “to reserve a number of ‘slots’ on its showroom
floor for [certain] vendors’ mattresses and to give the vendors’
products fair placement on the showroom floor.”
¶ 21 The court outlined the procedures plaintiffs employed to
display products on the showroom floors:
 “Un-boxing or un-wrapping the product.”
 “Assembling tables, beds, desks, and other items (attaching
table and sofa legs, installing knobs, connecting
footboards/headboards, building chairs, and plugging in
adjustable bases).”
 “‘Breaking in’ the cushions and pillows on sofas and chairs.”
 “For overhead light fixtures and lamps, hard-wiring to the
building’s electrical system and installing lightbulbs.”
11
 “For mattresses, trimming threads remaining from the
manufacturing process and installing a ‘shoe protector’ at the
foot of the mattress.”
 “Staging the display models in ‘vignettes’ with other furniture
and home décor or accessories to mimic a real living room.”
The court reviewed witness testimony and found that, although
plaintiffs often changed the “packaging” of their inventory to
prepare it for the showroom, the showroom furniture was “well-
maintained and kept in a like-new condition.”
¶ 22 The court then applied the Hirschfeld test and concluded that
plaintiffs purchased the displayed furniture primarily for resale.
C. Application of the Primary Purpose Test
¶ 23 Lakewood does not challenge any of the district court’s factual
findings as clearly erroneous. So, we accept them all. We review de
novo the application of the Hirschfeld primary purpose test to those
facts. See Conoco, Inc. v. Tinklenberg, 121 P.3d 893, 896 (Colo.
App. 2005); see also Coors, ¶ 42.
12
1. Plaintiffs’ Actual Conduct Following
the Purchase of the Furniture
¶ 24 Plaintiffs purchased large quantities of furniture, all of which
they intended to — and did — sell. Plaintiffs selected a sampling of
their inventory to display in their showrooms for customers to try
out before purchasing. As the district court noted, plaintiffs’
conduct demonstrated that the “primary and overriding concern in
[their] treatment of [the] floor models” was to preserve the
marketability of the displayed furniture because all inventory would
eventually be sold.
¶ 25 When customers purchased furniture, their orders were filled
from the warehouse or, sometimes, directly from the showroom
floor. Customers paid sales tax on all purchases.
¶ 26 Plaintiffs treated the displayed furniture as inventory for
income tax, accounting, and financial reporting purposes. Thus,
they did not derive any of the tax benefits, such as depreciation,
that could have come with non-inventory status.
¶ 27 We conclude that the totality of plaintiffs’ actual conduct
shows that they purchased the displayed furniture primarily for
resale in an unaltered condition and basically unused. The fact
13
that plaintiffs permitted customers to view and try out the displayed
furniture before it was sold does not indicate otherwise.
¶ 28 Lakewood stresses that the furniture remained on the floor for
an average of six to twelve months, and sometimes longer. For a
couple of reasons, however, the length of time the furniture stayed
on the floor is not especially illuminating. First, Lakewood’s
emphasis on time seems inconsistent with its taxation theory — i.e.,
once plaintiffs removed the furniture from the warehouse and
displayed it on the showroom floor to promote the product, a
taxable event occurred. The length of time the furniture remained
on the floor appears to be immaterial under this theory.
¶ 29 Second, the evidence did not show that any furniture item
remained on the showroom floor longer, on average, than a similar
item remained in the warehouse. The evidence did not reveal how
long furniture stayed in the warehouse on average. The testimony
showed, however, that furniture sometimes stayed in the warehouse
for six to twelve months, or longer. And Lakewood did not assess
use tax on warehouse items, no matter how long they remained.
True, evidence indicated that many more items were sold from the
warehouses than from the showrooms. But this fact simply reflects
14
that many more items were stored in the warehouses than in the
showrooms and that plaintiffs’ employees generally preferred to sell
warehouse items first so they would not need to replace the
furniture on the floor.
¶ 30 Hence, more significant than the time spent on the showroom
floor is whether the displayed furniture was for resale and was sold
in an unaltered condition and basically unused.3 The record
demonstrates that the furniture was for resale while on the floor, it
was sold in essentially new condition, and displaying the furniture
for advertising was therefore a minor use that furthered the resale
purpose. See Coors, ¶¶ 54-57 (concluding that purchase of scrap
aluminum was primarily for resale where Coors used the scrap
“only fleetingly” in the manufacturing process); see also C. F. & I.
Steel Corp. v. Charnes, 637 P.2d 324, 330 (Colo. 1981) (concluding
that no taxable event occurred where steel corporation “brief[ly]
utiliz[ed]” raw materials by diverting them “to its own temporary use
and then back to the normal steel-making process”).
3 Illustrating this point is Lakewood’s treatment of certain “out-the-
door” items in the showroom, which consisted of small merchandise
that was regularly sold from the floor (e.g., vases and pillows).
Lakewood excluded those items from use tax no matter how long
they remained on the floor because they were always for resale.
15
2. Plaintiffs’ Contractual Obligations to Use, Alter, or Consume
the Furniture to Produce Goods or Perform Services
¶ 31 Plaintiffs’ only contractual obligation regarding the displayed
furniture was Denver Mattress’s duty to give fair placement on the
showroom floor to some vendors’ mattresses. As the district court
explained, “[T]hese contractual obligations related only to
prominent placement on the showroom floor; not to committing
Denver Mattress to any manner of usage, alteration, or
consumption that differed from its treatment of other floor models
not governed by the contract.” Beyond prominent floor placement,
those obligations did not require any use.
¶ 32 In contrast, in Hirschfeld, a printing company purchased pre-
press materials — such as printing plates, film, and transparencies
— for use in printing brochures, letterheads, and greeting cards for
its customers. 806 P.2d at 918. In holding that the company’s
purchase of these materials was subject to the use tax, the supreme
court noted, “[I]t is clear that Hirschfeld could not perform the
services it was contractually obligated to perform for its customers
without making extensive use of the pre-press materials.” Id. at
923. “Hirschfeld substantially used and often altered the pre-press
16
materials in performing its contractual obligations to its customers.”
Id. at 924 (emphasis added).
¶ 33 Plaintiffs here had no contractual obligations to their
customers to display the furniture. At most, one plaintiff had
obligations to certain vendors as to some products. So, unlike in
Hirschfeld, plaintiffs had no contractual obligations to customers
that would require them to use, alter, or consume any furniture to
produce goods or perform services. Cf. City of Colorado Springs v.
Inv. Hotel Props., Ltd., 806 P.2d 375, 379 (Colo. 1991) (holding that
primary purpose of hotel’s purchase of guest room furniture was for
the hotel’s “use thereof in fulfilling its contractual obligations to its
guests”).
¶ 34 Lakewood argues that, because this case arose in the retail
context as opposed to the manufacturing context, “some deviation
from the exact . . . Hirschfeld factual predicate is warranted.” We
agree that the absence of the contractual obligations discussed in
Hirschfeld is not dispositive. Still, as Lakewood acknowledges, “a
contract requiring use may be evidence of a taxable interim
use . . . .” Therefore, the absence of such a contract tends to
support plaintiffs’ view that they purchased the displayed furniture
17
primarily for resale. Cf. Coors, ¶ 44 (“Although the manufacturer is
contracted to manufacture beer can ends and tabs, it is not
obligated to incorporate the scrap into those ends and tabs.
Rather, it is free to resell the scrap [to other customers].”).
3. Degree to Which the Furniture is Essential to Plaintiffs’
Performance of Their Contractual Obligations
¶ 35 All parties seem to agree, and the district court found, that
this factor does not add much to the analysis because plaintiffs did
not have contractual obligations (to customers) to use, alter, or
consume the displayed furniture to produce goods or perform
services. As discussed, however, the lack of pertinent contractual
obligations cuts in plaintiffs’ favor to some extent.
4. Degree to Which Plaintiffs Controlled the Manner in Which the
Furniture Was Used, Altered, or Consumed Prior to Sale
¶ 36 The supreme court found this factor germane in Hirschfeld
because Hirschfeld purchased the pre-press materials to use in
performing contractual obligations to its customers and “the
manner and extent of Hirschfeld’s use of the items was vested solely
in Hirschfeld.” 806 P.2d at 923. This factor is perhaps less
relevant here, where plaintiffs had no contractual obligations to
18
use, alter, or consume the furniture to produce goods or perform
services.
¶ 37 To the extent this factor remains relevant, we note that
plaintiffs controlled the manner in which the furniture was
displayed. For instance, plaintiffs removed the items from the
warehouses, unboxed them, assembled them into functioning
furniture, and arranged them in groupings to simulate living spaces
so that customers could try them out. Plaintiffs also controlled the
length of time that displayed items remained on the showroom
floors.
¶ 38 On the other hand, plaintiffs’ customers largely controlled
their interactions with the displayed furniture. Plaintiffs’ employees
sometimes encouraged customers to sit on a sofa or lie on a bed,
but customers were generally free to roam around the showrooms
and test the furniture as they pleased.
¶ 39 Consequently, this factor does not clearly support either
plaintiffs’ position or Lakewood’s position.
19
5. Degree to Which Plaintiffs Altered the Form, Character,
or Composition of the Furniture Prior to Sale
¶ 40 Lakewood contends that plaintiffs altered the form or
composition of the displayed furniture when they assembled it for
staging in the showrooms. Lakewood also argues that, after such
display, the character of the furniture went “from brand new to
used.”
¶ 41 As discussed by the district court, however, plaintiffs’
unboxing and assembly constituted merely a change in packaging
of the displayed furniture, not an alteration of form, character, or
composition. We find the reasoning in Coors instructive. The
division concluded that “the process that collects the [aluminum]
scrap and compresses it into briquettes is a change in packaging,
not a change in ‘form, character[,] or composition.’ . . . ‘[S]imply put,
[the manufacturer] purchased aluminum and ultimately resold
aluminum.’” Coors, ¶ 51 (quoting Hirschfeld, 806 P.2d at 921).
¶ 42 Likewise, plaintiffs purchased sofas, beds, chairs, etc. and
ultimately resold sofas, beds, chairs, etc. The district court found
that the furniture was well maintained and sold in “like-new
20
condition” on generally the same price terms as warehouse
furniture. Hence, this factor also weighs in plaintiffs’ favor.
¶ 43 In sum, the Hirschfeld factors in combination weigh decidedly
in plaintiffs’ favor. Under that test, then, plaintiffs’ primary
purpose in purchasing the displayed furniture was for resale.
D. Returning to Lakewood’s Regulations
¶ 44 Lakewood relies heavily on its special regulation pertaining to
“Initial Use of Property,” which states that any item purchased “for
use or consumption by the purchaser” is subject to tax for that use
even if the item is eventually resold in its original condition.
Lakewood Sales and Use Tax Special Regs., at 41. Lakewood says
that, under this regulation, whether the item shows physical signs
of use is irrelevant. The item could be used extensively and then
resold in its original condition, in which case the use tax would still
apply.
¶ 45 That may be true, but the Initial Use regulation — by its plain
terms — applies only to items purchased for the purchaser’s use or
consumption. As explained, plaintiffs purchased the displayed
furniture primarily for resale, not for their own use or consumption;
so the Initial Use regulation does not control here.
21
¶ 46 Nor does regulation 3.01.300(1)(b)’s explanation that the use
tax applies to items “withdrawn from stock.” That provision
pertains to tax-free purchases for resale that are later removed from
inventory “for the purchaser’s own use or consumption.” But
plaintiffs never withdrew the displayed furniture from stock. The
record reveals that the displayed furniture was always available for
resale. Sometimes it was sold quickly; other times it took more
than a year. But it was available for sale and always sold
eventually.
¶ 47 Finally, our reading of the tax code and regulations is
confirmed by Lakewood’s special regulation on “Automobile Dealers
and Demonstration Vehicles.” Lakewood Sales and Use Tax Special
Regs., at 31. A dealer’s “use of an inventory or stock vehicle is not
subject to a use tax if [the] vehicle is available for and in fact used
for the promotion of business.” Id. According to Lakewood, this
special regulation exempts a use to which the use tax would
otherwise apply. All tax regulations, however, must conform to the
tax code. See Lakewood Mun. Code 3.01.070. Therefore, this
regulation does not create an exemption from the use tax that is not
intended by the tax code itself. Instead, this regulation clarifies
22
how the use tax exemptions of the code apply to demonstration
vehicles used by dealers to promote sales. Plaintiffs’ use of the
displayed furniture for demonstration purposes is analogous; so,
the use tax consequences should be analogous.
¶ 48 For all the reasons discussed above, the use tax does not
apply to plaintiffs’ purchase of the displayed furniture.4
IV. Conclusion
¶ 49 The judgment is affirmed.
JUDGE J. JONES and JUDGE KAPELKE concur.
4 Because Lakewood’s code and regulations, considered in light of
Colorado case law, are sufficient to resolve this case, we need not
address the out-of-state cases cited by the parties. Besides, none of
those cases brings much to the table because none involved facts
very similar to those here.
23