Rio Blanco loses battle on oil, gas equipment use tax

The Colorado Supreme Court this week put an end to Rio Blanco County’s attempt to impose a use tax on equipment used by companies in natural gas operations.

But county attorney Kent Borchard said the court failed to clarify questions about the legality of the tax when applied to industry more generally.

“I think it’s only a matter of time before somewhere, somebody ends up in more litigation because it’s just not clear — an area that needs to be clarified,” Borchard said.

The Supreme Court on Monday turned down the county’s request for a rehearing in a case involving ExxonMobil. In November, with one justice not participating, the court split 3-3 on the case. By state law, that meant a Colorado Court of Appeals decision in favor of ExxonMobil stood.

The company had sued the county over its attempt to assess “use taxes, plus interest and penalties, in the amount of $748,400,” for a period including 2003 and part of 2004, according to the appeals court opinion in the case.

The appeals court agreed with findings by a lower court and the state Department of Revenue that pipelines, holding tanks and other equipment used by ExxonMobil don’t constitute construction and building materials, and thus aren’t subject to the tax.

ExxonMobil declined to comment on the case Tuesday. Representatives of the Colorado Mining Association and Colorado Association of Commerce and Industry, which filed briefs in the case, could not be reached for immediate comment.

Borchard said the county has been left confused by the appeals court’s contention that the Legislature hadn’t intended to have the use tax apply to industrial projects. He said the Legislature specifically indicated the tax is supposed to apply to oil shale development in the county.

Borchard said a few oil and gas companies have refused to pay the county’s use tax or filed their taxes under protest, while others that have paid the tax probably will dispute it now.

Chip Taylor, legislative director of Colorado Counties Inc., said his sense is most other energy-producing counties try to tax such materials another way, as a part of permit fees for things such as construction and road access. The question is whether the Rio Blanco County case will have any impact on them, he said.

Taylor said the Legislature previously passed a law specifying that materials unique to ski lift construction would not be subject to the use tax. He said the fact that a specific concession was made for that industry suggests that if the Legislature had intended for there to be other exceptions, it would have enacted them.


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