The layers at a glance
| Tax | Who it hits | Who collects it |
|---|---|---|
| State income tax | Individuals and businesses, at a single flat rate | Colorado Department of Revenue |
| State sales tax | Sales of taxable goods and some services (state rate 2.9%) | Colorado Department of Revenue |
| County and special district sales tax | Added on top of the state rate, varies by address | Usually the state, on their behalf |
| Home-rule city sales tax | Sales inside self-collecting cities | The city itself (or SUTS, if the city participates) |
| FAMLI premiums | Employers and employees | Colorado FAMLI Division |
| Unemployment insurance | Employers | Colorado Department of Labor and Employment |
| Occupational privilege tax | Employees and employers in a few cities | The city |
| Business personal property tax | Equipment and furniture above an exemption amount | County assessor |
Sales tax: the part that trips everyone up
The state rate is 2.9%, but nobody actually charges just 2.9%. Counties, transit districts and cities stack on top, so the combined rate depends on the exact address. Then home-rule cities may define what's taxable differently and collect separately. The practical rule: get licensed with the state and with every home-rule city where you have sales or a location, and look up rates by address, not by ZIP code.
Occupational privilege taxes
A handful of metro cities charge a flat monthly tax for the privilege of working there. Denver's is the best known: $5.75 per month withheld from employees who earn at least $500 from one employer in a month, plus $4.00 per month paid by the business for each taxable employee and each owner, partner or manager working in Denver (per the City and County of Denver). Aurora, Greenwood Village, Glendale and Sheridan have their own versions. Denver details live on our Denver payroll page.
Employer basics
- Register for Colorado wage withholding and unemployment insurance before the first payroll
- Register for FAMLI and remit premiums on schedule
- Check whether any work location triggers a city occupational privilege tax
- File new-hire reports with the state
Questions people ask
What is a home-rule city in Colorado?
A city that adopted its own charter under the Colorado Constitution. Many home-rule cities set their own sales tax rules and collect the tax themselves instead of through the state.
What is SUTS?
Colorado's Sales and Use Tax System, a state portal that lets businesses file and pay sales tax for many participating jurisdictions, including some home-rule cities, in one place.
What is Colorado FAMLI?
Colorado's paid family and medical leave insurance program. Most employers and employees share premiums based on wages, and the rate is set by the state each year.
What are TABOR refunds?
Colorado's Taxpayer's Bill of Rights caps how much revenue the state can keep. In years it collects more, the excess is refunded to taxpayers, usually through the income tax return.