Your Trusted Financial Partner in Colorado

State income tax: a single flat rate on individuals and pass-through owners

Colorado taxes individual income at a single flat rate rather than using graduated brackets, and that rate is applied to federal taxable income with state-specific additions and subtractions. Because there are no brackets, owner income that flows through an S corporation, partnership, or LLC is generally taxed at the same flat individual rate when it lands on the owner's Colorado return. This makes Colorado mechanically simpler than bracketed states, but the addition and subtraction modifications (and credits like the enterprise zone and child care credits) are where real planning happens. Always confirm the current flat rate with the Colorado Department of Revenue. Voters have cut it twice at the ballot, to 4.55 percent under Proposition 116 and to 4.40 percent under Proposition 121, and it also moves on its own in any year the state has a TABOR surplus to refund. That second mechanism is set out in the corporate section below, and it reaches individual and corporate filers together.

Business and corporate tax, plus the pass-through entity election

C corporations pay a flat-rate Colorado corporate income tax on income apportioned to the state, and Colorado does not impose a general franchise, privilege, or gross-receipts tax separate from that income tax. What the page above calls a flat rate is flat within a year and not across years. C.R.S. § 39-22-301(1)(d) sets the permanent corporate rate at 4.40 percent for tax years beginning on or after January 1, 2022, and C.R.S. § 39-22-627 then requires the executive director to reduce that rate temporarily whenever the state collects revenue above its TABOR limit. The reduction statute applies to individuals, estates, trusts and corporations alike, and names C.R.S. § 39-22-301(1)(d)(I) — the corporate rate provision — by number, so corporations are inside the mechanism rather than outside it. The 2019 and 2021 surpluses cut the individual and corporate rates together to 4.50 percent, and the 2024 surplus cut both to 4.25 percent.

Senate Bill 24-228 put the reduction on a published schedule running from tax year 2024 through tax year 2034. The size of the cut tracks the surplus the state has to refund: $300 million or less produces no reduction and the rate stays at 4.40 percent; above $300 million through $500 million gives 4.36 percent; above $500 million through $600 million, 4.33 percent; above $600 million through $700 million, 4.31 percent; above $700 million through $800 million, 4.29 percent; above $800 million through $1 billion, 4.28 percent; above $1 billion through $1.5 billion, 4.27 percent; and above $1.5 billion, 4.25 percent. The dollar bands are adjusted each year for allowable state spending growth, and section 39-22-627 is repealed effective July 1, 2035.

For a Colorado C corporation the practical consequence is that a rate belongs to a tax year and should not be carried forward into the next one. Estimated payments, deferred tax balances and any multi-year model need the rate keyed to the year being computed. Legislative forecasts published alongside SB 24-228 showed no reduction for tax year 2025 and a reduction to 4.28 percent for tax year 2026, but a forecast is not a rate: the figure follows the certified surplus once the fiscal year closes. Colorado offers a pass-through entity (PTE) tax election, often called a SALT-cap workaround, that lets partnerships and S corporations elect to pay the state tax at the entity level so owners can effectively deduct it federally despite the individual SALT deduction cap. For owner-operated businesses, whether to make the PTE election is a year-by-year decision that depends on owner residency, other state filings, and the federal benefit, so it should be modeled before each filing season rather than set on autopilot.

Sales and use tax: statewide rate plus heavy local and home-rule layering

Colorado has a statewide sales and use tax, but it is one of the most complicated sales-tax states in the country because counties, cities, and special districts add their own rates and a large number of home-rule municipalities administer and collect their own sales tax independently of the state. A single transaction can therefore involve the state rate plus several stacked local rates, and a home-rule city may require a separate license and return that the state portal does not cover. Colorado operates the Sales and Use Tax System (SUTS) to help remit state-collected and many local taxes in one place, but home-rule self-collecting jurisdictions often still must be handled directly. Remote and online sellers should map every jurisdiction they ship into, because the rate and licensing obligations differ city by city.

Economic nexus and marketplace facilitator rules

Following the Wayfair decision, Colorado requires out-of-state sellers that exceed a sales threshold into the state to register, collect, and remit Colorado sales tax even without a physical presence. Marketplace facilitators (the platforms that process sales for third-party sellers) are generally responsible for collecting and remitting tax on facilitated sales, which shifts some burden off individual sellers but does not eliminate a seller's own registration duties for direct sales. Because home-rule cities set their own economic-nexus and marketplace rules, a remote seller can owe tax in a Colorado city under that city's standards even where the analysis at the state level differs. Confirm current thresholds and home-rule rules with the Department of Revenue and the specific municipalities before relying on any single number.

Lodging and tourism taxes for STR, campground, and hotel operators

Short-term lodging in Colorado is generally subject to state sales tax, and on top of that many counties and cities impose their own local lodging or accommodations taxes, while designated areas can also levy Local Marketing District (LMD) taxes that fund tourism promotion. The practical result for STR hosts, campground and RV-park operators, and hotels is a layered bill: state sales tax plus one or more local lodging taxes that vary by jurisdiction and are often administered separately. Booking platforms may collect and remit some of these taxes for hosts, but coverage is uneven and rarely includes every local lodging or marketing-district tax, so operators frequently still owe direct registration and filing. Each property's exact mix of taxes depends on its precise location, and home-rule cities again add their own rules, so the obligations should be confirmed per address rather than assumed statewide.

Registration, filing cadence, and recordkeeping

Businesses generally register with the Colorado Department of Revenue for income tax withholding and for a sales tax license, and separately with any home-rule city where they have nexus or operate lodging. Sales tax returns are filed on a cadence (monthly, quarterly, or annually) that the state assigns based on tax volume, so a growing operator can see its filing frequency change over time. Income tax returns follow the federal calendar with Colorado-specific forms, and many businesses make estimated payments through the year. Keep clean exemption certificates, jurisdiction-by-jurisdiction sales records, and lodging-tax detail by property, because Colorado's multi-jurisdiction structure makes audits turn on whether you can prove tax was collected and remitted in the right city.