298 P.3d 993
Colo. Ct. App.2011Background
- Denver uses use tax to tax law firm’s costs to obtain copies of medical records for litigation; records are tangible property but may involve services; records are confidential and require authorization; the law firm pays for copies and is reimbursed by insurers/clients; health care providers do not charge sales tax; district court reversed hearing officer, concluding no purchase price or taxable sale; and the issue centers on whether the true object of the transaction is tangible property or intangible services.
- Medical records photocopies involve both tangible documents and the service of retrieval/copying, with value primarily in information; the true object analysis applies because the components are not meaningfully separable.
- Court applied Leanin’ Tree true object test to determine taxability of the mixed transaction and found the true object is the intangible information obtained by services, not the tangible paper.
- Court distinguished cases where tangible property was the true object, concluding this is not one of them, and cited related jurisdictions with similar outcomes.
- Ultimately, court affirmed the district court ruling that use tax does not apply to the law firm’s costs to obtain medical records.
- Conclusion: the district court did not err; use tax does not apply to the law firm’s photocopying costs for medical records.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is this a true object mixed transaction under Leanin’ Tree? | Alfrey argues true object is information, not tangible property. | Denver argues tangible property or retail sale occurred. | No; true object is intangible information; not taxable. |
| Are photocopying charges for medical records a taxable purchase of tangible property? | Charges represent services for obtaining records, not sale of property. | Charges are for tangible copies as property. | Not taxable; true object is information, not tangible property. |
| Should regulatory guidance compel tax despite Leanin’ Tree analysis? | Regulations support tax on copies. | Leanin’ Tree controls; regulations not decisive. | Not controlling; Leanin’ Tree governs outcome. |
Key Cases Cited
- Leanin’ Tree, Inc. v. City of Boulder, 72 P.3d 361 (Colo. 2003) (true object analysis for mixed tangible/intangible transactions)
- Noble Energy, Inc. v. Colo. Dep’t of Revenue, 232 P.3d 293 (Colo. App. 2010) (non-separable materials/services; taxability by true object)
- Cinemark USA, Inc. v. Seest, 190 P.3d 793 (Colo. App. 2008) (separation of tangible product from license; true object considered)
- Talbots, Inc. v. Schwartzberg, 928 P.2d 822 (Colo. App. 1996) (deference to agency interpretations; mixed questions of law and fact)
- Van Sickle v. Boyes, 797 P.2d 1267 (Colo. 1990) (de novo review of tax/land use/interpretation statutes)