Colorado Business Taxes at a Glance
Colorado's income tax is a flat rate, but its sales tax is one of the most complicated in the country. Dozens of home-rule cities administer their own sales taxes, with their own rules and returns, separate from the state. Add a retail delivery fee, Denver's tax on workers, and a state paid leave program, and Colorado compliance can take more time than owners expect. BOMCAS helps Colorado businesses and individuals stay on top of it.
Individual Income Tax and TABOR Refunds
Colorado taxes income at a single flat rate, starting from federal taxable income with Colorado adjustments. Colorado's Taxpayer's Bill of Rights (TABOR) limits how much revenue the state can keep. When revenue exceeds the limit, the surplus is returned, and the method has varied: temporary rate reductions, refunds with the income tax return, and other mechanisms set by law. Whether and how a refund is paid in a given year depends on state revenue and legislation.
Colorado also offers a pass-through entity tax election for partnerships and S corporations, with credits for owners. We prepare Colorado returns, include available TABOR refunds, and evaluate the PTE election.
Sales Tax: State, Local, and Home-Rule Cities
Colorado's sales tax has several layers: the state, counties, special districts, and cities. Many local taxes are collected by the state along with the state tax. But Colorado's home-rule cities, including Denver, Aurora, Colorado Springs, Boulder, and many others, can administer their own sales and use taxes, with their own licenses, definitions, and returns.
This means:
- A sale may be taxable in a home-rule city even if it is exempt at the state level, or the other way around
- A business may need separate licenses with the state and each home-rule city where it sells
- Sales are generally sourced to where the customer receives the goods, so delivery-based businesses deal with many jurisdictions
Colorado's Sales and Use Tax System (SUTS) lets businesses file state, state-collected local, and many home-rule city returns in one place, which helps a great deal. We help businesses determine where they must register, file through SUTS or directly with cities, and reconcile tax collected to the books.
The Retail Delivery Fee
Colorado charges a retail delivery fee on retail sales delivered by motor vehicle to a location in Colorado when at least one item is subject to sales or use tax. Retailers collect it from the customer and report it to the Department of Revenue. Some smaller retailers are exempt. Retailers that ship goods should check whether they must collect it and show it correctly on invoices.
Use Tax
Colorado businesses that buy taxable goods without paying sales tax, such as equipment from out-of-state vendors, generally owe state and local use tax. Home-rule cities often audit for use tax and may tax items that the state does not. Construction projects can trigger use tax on building materials in the city where the work is done. We check purchases for use tax during monthly bookkeeping.
Denver's Occupational Privilege Tax
Denver charges an Occupational Privilege Tax (OPT) on employees who work in the city above a monthly earnings threshold and on businesses with workers there. The employee and employer each pay a fixed monthly amount, and the employer withholds the employee's share. A few other Colorado cities have similar taxes. Remote and hybrid workers raise questions about which months count as Denver work. We set up OPT in payroll and file the returns.
Payroll and FAMLI
Colorado payroll includes state income tax withholding, unemployment insurance reporting to the Department of Labor and Employment, and Paid Family and Medical Leave Insurance (FAMLI) premiums. FAMLI premiums are shared between employers and employees, with small employers exempt from the employer share. Employers can apply for an approved private plan instead. We run payroll, file quarterly reports, and reconcile premiums.
Mountain Lodging and Short-Term Rentals
Lodging in Colorado's mountain communities is taxed in layers: state and local sales tax, local lodging or accommodations taxes, and in some towns special taxes or fees on short-term rentals, several of which are administered by the town or county rather than the state. Owners of condos and homes rented through platforms should confirm which taxes the platform collects and which they must file themselves, and keep each property's local license current. We help owners and management companies register, file, and keep rental records ready for federal returns.
Corporate Income Tax
Corporations doing business in Colorado pay corporate income tax at a flat rate on apportioned income, using a single sales factor. Colorado uses combined reporting for affiliated groups that meet certain tests. We prepare corporate returns and handle Colorado-specific additions and subtractions.
Ski Towns, Cannabis, Aerospace, and Energy
- Ski and mountain tourism: lodging taxes, resort-area local taxes, and seasonal payroll
- Cannabis: separate state marijuana taxes and limits on federal deductions
- Aerospace and technology: apportionment, research credits on federal returns, and equity compensation
- Energy: severance tax and joint interest accounting
- Construction: use tax on materials by city and job costing
Recording Sales by Jurisdiction
Colorado bookkeeping should record sales by delivery location and jurisdiction, separate home-rule city sales, track the retail delivery fee, and record use tax on purchases. We set up the chart of accounts and monthly close so returns come straight from the books.
Contact BOMCAS About Colorado
If your business sells into home-rule cities, ships goods subject to the retail delivery fee, or has employees in Denver, contact BOMCAS and we will map out which returns you need. We work with Colorado clients remotely. City and service pages for Colorado will be published under this section next. The BOMCAS home page and our United States services describe the rest of our work. This page is general information, not advice on a specific filing.
Talk to BOMCAS About Your Colorado Taxes
Have a question about your Colorado filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.