International Business MacHines Corp. v. Charnes

The Executive Director of the Colorado Department of Revenue (Director) determined that International Business Machine Corporation (IBM) is liable for use tax upon the “capitalized cost” or “full finished goods cost” of items it withdraws from its work in process and sales inventories and diverts to its own intracompany use within Colorado.

After a trial de novo, the district court reversed, holding that a use tax may be imposed upon only the “materials cost” of such items diverted for internal use. The Director had asserted the use tax against the higher “full finished goods cost” or…