Digital motion pictures subject to municipal use taxes in Aurora case

On two prior occasions, the Colorado Court of Appeals has affirmed that motion picture film reels obtained by commercial movie theaters are subject to municipal use taxes. Now that the technology has changed and most theaters have switched to digital projection, the result is the same. The data file on the hard drive leased to the movie theater remains tangible personal property subject to use taxes, so said the court of appeals on January 2 in a case arising out of the City of Aurora. As in the earlier cases, the court went on to hold that the rental of the digital files by the theaters cannot be viewed as a purchase for resale, nor are the digital files viewed as part of a manufacturing process. Finally, there is no “double-taxation” problem when patrons are charged a sales or admission tax to view the movie. The use tax on the value of the data files is paid by the business. The admissions tax on the privilege of viewing the movie is paid by the customers.

CML participated as an amicus curiae in this case along with five other individual municipalities; and we again extend our appreciation to Michael Axelrad of the Greeley City Attorney’s office for his help in drafting the amicus brief.

American Multi-Cinema Inc. v. City of Aurora, ___ P.3d ___ (Colo. App. January 2, 2020).

Read the CML amicus brief here.