Denver Business Tax Obligations: A Straightforward Overview
Doing business in Denver means dealing with a layer of local tax and licensing requirements on top of your federal and state obligations. None of it is unmanageable — but you do need to know what applies to you.
Denver Business License
Most businesses operating within Denver city limits need a Denver Business License. You apply through the Denver Community Planning and Development (CPD) office. The type of license and associated fees depend on your business type and activities.
Operating without a required license can result in penalties, so this should be one of the first things you handle when setting up in Denver.
Denver Occupational Privilege Tax (OPT)
The Denver OPT is often called a head tax — it applies to employees who work within Denver and earn above a minimum monthly threshold. Both the employer and the employee pay a portion:
- Employee portion: Withheld from each qualifying employee's wages
- Employer portion: Paid separately by the business for each qualifying employee
The OPT is filed and remitted to the Denver Department of Finance on a monthly or quarterly basis depending on your payroll size. Miss these filings and you'll face penalties.
Denver Sales Tax
Denver has its own sales tax rate that applies on top of Colorado's state sales tax. The combined rate includes state, county (RTD and CD), and city components. If you sell taxable goods or services in Denver, you're responsible for collecting and remitting the correct combined rate.
Colorado's sales tax system is notoriously complex — there are hundreds of jurisdictions with different rates and rules. Getting this wrong is one of the most common (and most expensive) mistakes Denver businesses make. If you have any uncertainty about your sales tax obligations, it's worth getting a professional assessment.
Colorado Wage Withholding
Colorado employers are required to register with the Colorado Department of Revenue and withhold state income tax from employee wages. You'll file withholding returns on a schedule determined by the size of your payroll. Larger payrolls mean more frequent filings.
Self-Employment Tax
If you're a sole proprietor or a single-member LLC without an S-Corp election, your business profit is subject to self-employment tax (15.3% on the first $168,600 as of 2024, plus Medicare tax above that). This is in addition to income tax — and it's one of the biggest surprises for new business owners.
Proper quarterly estimated payments are essential to avoid underpayment penalties.