September 01, 2014 | By Keith Martin in Washington, DC

Colorado treats sales of electricity as a “service” rather than a sale of “property,” the state Supreme Court ruled. 

The ruling by the court in late June could make construction of new power plants in Colorado more expensive. 

The state collects a 2.9% sales or use tax on equipment sold in state or bought out of state and imported for use in Colorado. There are city and county sales taxes on top of the state rate. 

Like most states, Colorado has a manufacturing exemption: equipment is not subject to sales or use tax if it is purchased for use in manufacturing “tangible personal property.” In many states,  generating electricity is considered manufacturing tangible personal property, but because Colorado considers the provision of electricity a service, the manufacturing exemption does not apply, the court said.

The decision was in a case called Colorado Department of Revenue v. Public Service Company of Colorado. Two lower state courts had said electricity is tangible personal property.