Colorado Supreme Court Will Decide Whether Breckenridge's Short-Term Rental Charge Is a Tax

On October 19, 2026, the Colorado Supreme Court agreed to review Dorotik v. Town of Breckenridge, a challenge to the town's annual charge on short-term rental (STR) licenses. The question is whether the charge is a fee, which a town may adopt on its own, or a tax, which the Colorado Taxpayer's Bill of Rights (TABOR) requires voters to approve. The answer matters to STR owners in Breckenridge and to anyone who owns, buys or underwrites rental property in a Colorado community that funds programs through regulatory fees.

The Breckenridge charge and the court of appeals decision

Breckenridge adopted Ordinance No. 35 in 2021. It imposes an annual charge on owners who obtain or renew an STR license. The Town Council sets the amount each year in its budget, subject to a cap of $756 per bedroom. According to the court of appeals, a consultant's study found a maximum supportable charge of $2,161 per bedroom, and the town set the charge at 35% of that figure. The money is accounted for separately, cannot be transferred to the general fund, and may be used only for local workforce housing programs, for addressing secondary STR impacts such as parking, noise and trash, and for administering and enforcing the program.

An STR owner sued, arguing that the charge is a tax adopted without the voter approval required by article X, section 20(4)(a) of the Colorado Constitution. His central argument was that STR guests already generate sales and lodging tax revenue well in excess of the program's cost, so there is no unfunded expense for a fee to cover. The district court dismissed the complaint.

In March 2026, a division of the court of appeals affirmed in Dorotik v. Town of Breckenridge, 2026 COA 20. Applying the test from Colorado Union of Taxpayers Foundation v. City of Aspen, 2018 CO 36, the division asked whether the charge's primary purpose is to defray the cost of a comprehensive regulatory scheme, and then examined how the charge works in practice. It found the ordinance's stated purpose, segregated accounting and restricted uses consistent with a fee. It rejected the "revenue positive" argument, explaining that no authority requires a fee calculation to account for other tax revenue the regulated activity produces, and that a fee need only be reasonably related to the cost of the regulation. The division held that the ordinance "did not violate TABOR by imposing the STR charge on a 'revenue positive' activity."

What the supreme court will decide

The supreme court granted review on two questions. The first is whether a governmental entity can impose a fee, without voter approval, on a revenue-positive activity, meaning one that produces more revenue than it costs the municipality. The second is whether the court of appeals mischaracterized the fee in the Aspen case as a fee on shopping rather than a fee on the distribution of single-use bags. Justice Gabriel is not participating.

A grant of review is not a ruling on the merits. The case now moves to briefing and oral argument, and until the supreme court decides it, the court of appeals opinion upholding the Breckenridge charge is the governing appellate decision.

Who should pay attention

STR owners in Breckenridge are the most directly affected. The case also reaches further. Colorado local governments rely on regulatory fees to fund a range of programs, and the line between a fee and a tax under TABOR determines whether those charges need voter approval. A decision limiting fees on activities that already generate tax revenue could affect how municipalities structure STR charges and other regulatory fees. A decision affirming the court of appeals would confirm that local governments may impose fees on activities that are also taxed, as long as the charge satisfies the Aspen test.

What to consider now

• Treat the charge as valid for now. It is tied to obtaining and renewing an STR license, and the appellate decision upholding it remains in place while the supreme court considers the case.

• Keep records of every STR charge you pay, including the year, the amount and the bedroom count. Whether any refund would be available if the supreme court rules against the town is an open question, and good records will matter either way.

• Build local fees into your underwriting. If you are buying property in a community with an STR program, review the current licensing rules, fees and any limits on licenses, and treat them as operating costs that can change.

• Follow the case and local council action. Municipalities may revisit their fee structures depending on how the supreme court rules.

If you own or are considering buying short-term rental property in Colorado and have questions about how this case or local STR regulations may affect you, please contact LMB Partners.

This post is general information, not legal advice. Reading it does not create an attorney-client relationship. Consult a lawyer about your specific situation.