Denver Business Taxes: What Owners Need to Know

Running a business inside Denver city limits adds a local layer of tax that owners in most other Colorado towns do not see. None of it is complicated on its own. The trouble is that each piece has its own license, its own form and its own calendar, and the penalties for missing one add up quickly. Here is how the pieces fit together.

What is Denver’s Occupational Privilege Tax?

The Occupational Privilege Tax, or OPT, is often called the head tax. It is a flat monthly charge for working in Denver, and it has two parts, according to Denver’s Tax Guide Topic 61:

• Employee OPT: $5.75 a month, withheld from the pay of each employee who earns at least $500 for work in Denver in a calendar month.
• Business OPT: $4 a month, paid by the employer for each taxable employee, plus $4 a month for each owner, partner or manager engaged in business in Denver, regardless of earnings.

Employers with ten or more employees file and pay monthly. Smaller employers may file quarterly. The OPT return has to be filed even when no tax is due, and a late return costs 15% of the tax or $25, whichever is greater, plus interest of 1% a month.

For illustration, take a Denver landscaping company with two owners and twelve employees who each earn more than $500 a month. The business owes $4 for each of the 14 people, or $56 a month and $672 a year. It also withholds $5.75 from each employee, or $69 a month, and sends that in with the return. Because it has more than ten employees, it files monthly.

The most common mistake is forgetting the owner portion. A one-person consulting firm with an office in Denver usually owes the $4 a month even with no payroll.

How do Denver sales and use tax work?

Denver is a home-rule city, which means it writes and collects its own sales tax instead of letting the state collect it. A business selling taxable goods or services in Denver needs two licenses: a Colorado sales tax license and a Denver retail sales license.

Colorado’s state rate is 2.9%, as the instructions for the state sales tax and withholding application note, and cities, counties and special districts add their own. In Denver, the combined rate also includes special district taxes and the city’s own rate. To confirm the rate for a specific address, use the state’s sales and use tax rate lookup.

Denver’s Tax Guide Topic 47 sets the license fees. A retail sales license is $50 per location for each two-year period, and licenses renew on January 1 of every even-numbered year, so the next renewal is January 1, 2028. Fees are prorated if you start partway through a cycle. Businesses that rent rooms or homes for fewer than 30 consecutive days also need a lodger’s tax license, which matters for short-term rental owners.

Use tax is the other half of the system. If your business buys something taxable for use in Denver and the seller does not charge Denver sales tax, such as equipment from an out-of-state website, you owe Denver use tax on it. A consumer’s use tax account costs nothing to open. The state has a matching consumer use tax at the same 2.9% rate.

Do I owe tax on business equipment and furniture?

Yes, through property tax. Colorado taxes business personal property, meaning the furniture, equipment, computers and machinery a business owns. Each year, by April 15, a business files a declaration schedule with the county assessor listing what it owned on January 1. The assessor values the property and the county bills the tax later.

Denver’s Assessor’s Office says on its business personal property page that eligible new small businesses may be exempt from filing if the total actual value of their personal property in Denver is $52,000 or less. A business that does not file can be valued by the assessor without its input, which rarely works in the owner’s favor.

What about Colorado wage withholding?

Every employer that pays wages in Colorado registers for a state withholding account. Registration has no fee and does not need renewing. How often you file depends on how much you withhold in a year, according to the Department of Revenue’s withholding frequency rules:

• Less than $7,000 a year: quarterly, due the last day of the month after each quarter
• $7,000 to $50,000: monthly, due the 15th of the following month
• More than $50,000: weekly, due the third business day after each Friday period, paid electronically

How does Colorado tax business income?

That depends on the entity.

C corporations pay Colorado corporate income tax at a flat rate. The Department’s Corporate Income Tax Guide lists 4.4% for 2025 and 4.25% for 2024, when the rate was temporarily lower. A corporation whose net Colorado tax for the year exceeds $5,000 generally must make quarterly estimated payments.

Partnerships and S corporations file a Colorado return, but the income usually passes through to the owners, who pay tax at the individual rate on their own returns. Under Colorado’s SALT Parity Act, the business can elect each year to pay the tax itself. The owners then claim a credit for their share of that tax and add back certain deductions. The appeal is that the tax is paid by the business rather than by the owners personally, which can keep it outside the federal cap on state and local tax deductions, $40,400 for 2026.

Sole proprietors and single-member LLCs report business profit on their personal returns. They also owe federal self-employment tax of 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare. For 2026, the Social Security portion applies to the first $184,500 of combined wages and self-employment earnings, per IRS Publication 15.

A simple way to keep track

Think of Denver compliance as three calendars running at once. A monthly or quarterly calendar covers sales tax (state returns are due the 20th of the month after the period), wage withholding and OPT. A quarterly calendar covers estimated income tax. An annual calendar covers the April 15 property declaration, income tax returns and license renewals. Put every date on one shared calendar with the responsible person’s name next to it. A missed date is the most avoidable penalty there is.

If you would like help building that calendar, or cleaning up a missed filing, our tax planning team and payroll team handle these obligations for Denver businesses every month.