With its low startup costs, competitive tax rates, and business tax incentives, it’s easy to see why Colorado ranked 14th on Forbes’ list of best states to start a business in this year.
To succeed as a small business owner in the Centennial State, you’ll need to understand and comply with your tax obligations as well. To make this easier for you, we’ve compiled information on the business taxes you can expect to pay in Colorado, including details on how to file and pay each one.
What business taxes do you pay in Colorado?
The state taxes a small business owner pays typically depend on factors like the location, employer status, industry, and business entity type.
Unlike some states, businesses in Colorado are not subject to franchise or privilege taxes. The taxes your business may be required to pay in the Centennial State include income tax, employer taxes, sales and use tax, as well as any local or industry-related taxes that apply. We’ll review these taxes in greater detail in the following sections.
Colorado personal income tax
Most pass-through entities—including sole proprietorships, partnerships, limited liability companies (LLCs), and S corporations—don’t pay state income taxes themselves. Instead, these taxes are passed on to the owners of the business, who pay the taxes on their personal returns.
In the state of Colorado, the individual income tax rate in 2024 is 4.4% of taxable income received from Colorado sources.
How to file and pay
Individual income tax returns (Form DR 0104) are due by April 15. If you’re a part-year Colorado resident or a nonresident with income from Colorado sources, you must file Form DR 0104PN along with your return.
Business owners can file and pay most of their taxes, including the personal income tax, through the Department of Revenue (DOR) Revenue Online portal—or ROL for short. Alternatively, taxpayers can file their individual tax return by mail instead by sending it to the appropriate address listed on the tax form.
If your estimated tax liability for the year exceeds $1,000, you must make quarterly estimated tax payments to the DOR by the 15th of April, June, September, and January. Estimated tax payments can be made via ROL. If you plan to send your estimated tax payments by mail, make sure to include Form DR 0104EP with your payment and send it to the address below:
Colorado Department of Revenue
Denver, Colorado 80261-0008
For more information on Colorado’s personal income tax, visit the Colorado DOR website or review the state’s individual income tax filing guide.
Colorado partnership and S corporation tax return
While their owners generally pay business taxes through their personal returns, companies structured as partnerships, S corporations, or LLCs taxed as partnerships or S corporations must file a separate tax return each year.
The business may also be required to withhold and pay income taxes on behalf of nonresident partners or shareholders. More information on this filing requirement can be found in the instruction booklet for the Colorado partnership and S corporation income tax return.
How to file and pay
Partnership and S corporation tax returns (Form DR 0106) are due by the 15th day of the fourth month after the end of the fiscal year (or April 15, for calendar year filers).
Partnership and S corporation returns may be filed online through the Revenue Online portal. But if you’re filing a Colorado business tax return for the first time, you must file your return using an authorized tax software program or by mail using the appropriate address on the tax form. After that, you may submit all future returns via ROL.
If a business elects to file a single return on behalf of its nonresident partners or shareholders (what’s known as a composite return), and if the tax liability for any taxpayer under this return is greater than $1,000, the company must make estimated tax payments to the DOR each quarter.
The deadlines for submitting estimated tax payments are the 15th day of the fourth, sixth, ninth, and 12th months of the fiscal year. These payments can be submitted electronically via ROL or electronic funds transfer (EFT). However, if you pay by mail, send your payment along with Form DR 0106EP to this address:
Colorado Department of Revenue
Denver, Colorado 80261-0008
Learn more about the state’s partnership and S corporation tax return requirements by visiting the Department of Revenue website.
Colorado SALT Parity Act election tax
Under the recently-passed SALT Parity Act, eligible businesses (which include partnerships, S corporations, and LLCs taxed as a partnership or S corporation) can choose to have their company taxed as a single entity.
These electing pass-through entities don’t pass off their Colorado income tax obligations to their partners or shareholders. Instead, companies that take this election may be eligible for a deduction on their federal taxes.
If you’re interested in making the SALT Parity Act election for your business, talk to your accountant or tax advisor to determine whether it would be a good fit for your financial situation.
How to file and pay
Eligible businesses can make the SALT Parity Act election by checking the applicable box on their tax return (Form DR 0106) and submitting the return by the 15th day of the fourth month after the fiscal year ends. If you want to make the election before your tax return due date, you can do so by filing Form DR 1705. Note that these elections must be made on an annual basis, so you’ll need to file for every tax year you want this election to apply to.
Tax returns should be filed online through Revenue Online or by mail using the appropriate address listed on the tax form.
Electing pass-through entities must also pay estimated taxes each quarter if their tax liability for the year exceeds $5,000. These tax payments are due by the 15th day of the fourth, sixth, ninth, and 12th months of the fiscal year. Submit payment via ROL or EFT, or by mail along with Form DR 0106EP.
For more information on this tax election, read the Department of Revenue’s publication on the SALT Parity Act.
Colorado corporate income tax
C corporations (and LLCs taxed as such) that are organized or do business in the state of Colorado are also required to pay income taxes. The state corporate income tax rate is 4.4%.
How to file and pay
Corporate tax returns (Form DR 0112) are due on the 15th day of the fourth month after the fiscal year ends. For companies that follow the calendar year, the due date is April 15.
Corporate tax returns may be filed electronically through Colorado’s Revenue Online portal or the Internal Revenue Service (IRS) Modernized eFile program. Alternatively, companies that prefer to file paper returns can do so by mailing their tax forms and payment to the address below:
Colorado Department of Revenue
Denver, Colorado 80261-0006
If your company’s estimated annual tax liability is over $5,000, you must also make estimated tax payments each quarter. Payments are due by the 15th day of the fourth, sixth, ninth, and 12th months of the fiscal year. Most businesses can pay these taxes online via ROL or EFT, but companies that prefer to send payment by mail should send Form DR 0112EP with their payment to this address:
Colorado Department of Revenue
Denver, Colorado 80261-0006
Visit the Colorado Department of Revenue website for more information on the state’s corporate income tax.
Sales and use tax
Colorado sales tax is collected at the point of purchase and paid to the Department of Revenue. If your company sells physical products or certain taxable services, you may be required to pay sales tax in the state. Confirm with your tax professional if you’re unsure whether this tax applies to your business.
In 2024, the state sales tax rate is 2.9%.
How to file and pay
All businesses that collect sales tax must first register for a sales tax license through the MyBizColorado website. Several licenses are available, but most companies will only need the standard retail one.
When you receive your license, you’ll also be assigned a filing frequency that’s determined by your estimated sales tax liability. Most businesses become monthly filers. But if your estimated monthly sales tax liability is less than $300, you’ll be assigned a quarterly filing frequency. If your monthly tax liability is $15 or less, you’ll file and pay sales taxes on an annual basis instead.
No matter your filing status, your due date will always be the 20th day of the month following the end of the tax period. So if you’re a monthly filer, for example, your sales tax returns for June would be due on July 20.
The state encourages businesses to file and pay sales taxes electronically through Revenue Online, the state’s Sales & Use Tax System (SUTS), or an approved sales tax filing software. If you want to file your returns by mail instead, fill out Form DR 0100 and mail it along with any payment to the address below:
Colorado Department of Revenue
Denver, Colorado 80261-0013
Read the sales tax guide on the DOR website for more information on this state tax.
Wage withholding tax
Companies that pay employees for services performed in Colorado must withhold a portion of each of these employees’ wages and pay it to the Department of Revenue. These taxes are typically called withholding taxes or employment taxes. In Colorado, they’re known as wage withholding taxes.
Wage withholding tax rates differ between employees because the rate is determined by factors like the employee’s wages and withholding allowances. Use the DOR’s withholding calculator to determine how much to withhold from each employee’s paycheck.
How to file and pay
Colorado employers must register for a state wage withholding tax account before they can withhold income taxes from employee wages. You can apply for an account online via MyBizColorado.
Your business will be assigned a weekly, monthly, or quarterly filing frequency after the DOR creates your wage withholding account. The filing frequency you’re assigned is based on your withholding tax liability.
Use the chart below to see what your wage withholding responsibilities would look like based on your filing frequency:
| Filing frequency | Annual withholding tax liability | Due date |
| Quarterly | Less than $7,000 | Last day of the month after the end of the calendar quarter |
| Monthly | At least $7,000 but not exceeding $50,000 | 15th day of the following month |
| Weekly | $50,000 or more | Third business day after the Friday that closes out the week |
Keep in mind that quarterly and monthly filers must file a return for every filing period, even if they have no wages or taxes to report (unless they have prior approval from the Department of Revenue).
Most employers may file and pay wage withholding taxes electronically via Revenue Online or electronic funds transfer. Weekly filers, however, must only use EFT to pay their withholding taxes. If you’re not a weekly filer and want to file your returns by mail, submit Form DR 1094 along with your payment to the following address:
Colorado Department of Revenue
Denver, Colorado 80261-0009
Additionally, all employers must reconcile their company’s tax withholding by filing Form DR 1093 (for Forms W-2) and Form DR 1106 (if you have contract workers) by January 31.
Visit the DOR website to learn more about the Colorado wage withholding tax.
Unemployment insurance tax
Unemployment insurance (UI) taxes cover benefits for eligible workers who have lost their job through no fault of their own. In Colorado, employers must pay unemployment tax if they pay $1,500 or more in wages in a calendar quarter or have at least one employee for at least one day in 20 weeks of the calendar year.
An employer’s premium rates are determined by a number of factors, such as the UI contributions and benefits payments they’ve made to date. Most non-construction new employers are assigned a 3.05% premium rate, which they pay on the first $23,800 of each employee’s wages.
How to file and pay
To pay Colorado unemployment taxes, employers must register their business with the MyUI Employer+ online portal.
Quarterly wage reports and tax payments are due by the last day of the month of April, July, October, and January. Reports and payments should be submitted online via MyUI Employer+ unless you’ve been approved to file by mail.
For more details on the state’s unemployment insurance tax, visit the Colorado Department of Labor and Employment website.
Other industry-related and local taxes
In addition to the state taxes described above, businesses in certain cities and counties are subject to local income and sales taxes.
The local income tax in Colorado is known as the occupational privilege tax (OPT), and it’s split into two parts: one portion paid by the employer and the other paid by the employee. Municipalities differ on how the tax liability is split, so you’ll want to check with your local tax authorities for further details.
Local sales tax rates are also determined by the city or county. The state’s maximum local sales tax rate is 8.3%, resulting in an average combined state and local sales tax rate of 7.78%. Use the state’s sales tax lookup tool to determine your business’s combined sales tax rate.
The state of Colorado also levies excise taxes on certain industries and business activities. Below is a list of some industries and products that are taxed in the state:
- Alcohol
- Cigarettes and tobacco products
- Fuel
- Marijuana
- Passenger miles
- Public utilities
Because the taxes described in this section are determined by factors like location, industry, and business activities, it’s best to talk to your accountant or tax advisor to get a full picture of your company’s tax obligations.
Colorado business tax breakdown by business type
Business taxes can get complicated, so below, we’ve included a chart that breaks down which taxes different business structures usually pay.
Keep in mind that pass-through entities don’t pay federal income taxes themselves—the obligation is passed on to their business owners or shareholders, who pay them through their personal income tax returns.
| Business type | Personal income tax | Partnership and S corporation tax return | Colorado SALT Parity Act election tax | Corporate income tax | Sales and use tax | Withholding tax | Unemployment tax | Federal income taxes |
| C corporation | No | No | No | Yes | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes |
| S corporation | Yes (pass-through), if not making the SALT Parity Act election | Yes | Yes, if it makes the election | No | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
| LLC | Yes (pass-through), if not making the SALT Parity Act election | Depends on how it’s structured | Depends on how it’s structured | Depends on how it’s structured | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
| Partnership | Yes (pass-through), if not making the SALT Parity Act election | Yes | Yes, if it makes the election | No | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes (pass-through) |
| Sole proprietorship | Yes (pass-through) | No | No | No | Yes, if applicable | Yes, if you hire employees | Yes, if you hire employees | Yes, by way of individual income tax |
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