Taxes and Regulations
Tax season is every season.
Taxes and Regulations in Colorado
Colorado has one of the nation’s most favorable business tax climates.
Corporate Income Tax
Colorado’s corporate income tax is a flat 4.63%. It is assessed on Colorado net income, defined as the corporation’s federal taxable income, with some modifications.
Beginning in January 1, 2009, multistate corporations with operations in Colorado are taxed using single-factor apportionment. This approach allows companies to pay taxes based solely on their sales in the state.
Individual Income Tax
Colorado has a flat individual tax structure. The income tax for all residents is 4.63% of Colorado taxable income.
Sales and Use Taxes
Colorado’s 2.9% sales or use tax on goods purchased by a business that are not intended for resale is the lowest among the 45 states that collect sales tax. Services are not taxed, only sales of non-food items. Use taxes substitute for sales taxes in cases where an item is purchased for consumption in Colorado from a source outside Colorado or other circumstances where a sales tax was not paid.
Major Sales Tax Exemptions:
- Manufacturing equipment or machine tools over $500 purchased in one calendar year
- Machinery and equipment used for production of electricity from renewable sources
- Component parts
- Fuels and Electricity – exemption temporarily suspended until June 30, 2012 as emergency measure to balance state budget
- Packaging Materials
- Aircraft parts used in general maintenance
- Aircraft manufactured in Colorado and sold to out-of-state buyers
- Interstate long distance telephone charges
- Ink and Newsprint
- Farm Equipment and Machinery
- Tangible Personal Property Used in Biotech, Clean technology and medical device research & development (refund, not exemption)
For additional information on Sales and Use Taxes, visit the Colorado Department of Revenue.
Unemployment Insurance Taxes
An employer’s unemployment insurance tax liability is based on the taxable wage base, which is the first $10,000 of each worker’s wages.Â If covered for the fist time, the tax rate will be 1.7% of the wage base rate, plus an annually computed surtax.Â the surtax is 0.22%, plus a solvency surcharge of 0.6% for a total of 2.52%. Specific information on the tax rate can be obtained from the Colorado Department of Labor and Employment Unemployment Insurance Tax Branch.
Workers’ compensation insurance is provided by over 200 private insurance companies and the State Compensation Insurance Fund, d.b.a. Pinnacol Assurance, an independent political subdivision of the state, which operates as a workers’ compensation insurance company. Colorado’s rates are among the lowest in the country.
The State of Colorado does not impose property taxes on businesses; local governmental units assess property taxes primarily to fund public school operations and local governmental services. Commercial and industrial property is assessed for property tax purposes at 29% of market value.
Five cities in Metro Denver assess an occupational tax when employees pay surpasses a minimum threshold. Cities with occupational tax include Aurora, Denver, Glendale, Greenwood Village and Sheridan.