Colorado LLC Taxes

With many cities like Denver and Colorado Springs becoming hubs for tech companies and other industries, Colorado is growing into a popular location to start businesses. But like with all states, Colorado has its own unique laws and taxes that businesses must follow, which can be overwhelming at first.

No matter the size or amount of time your business has been operating, if you run a limited liability company (LLC) in Colorado, you will need to pay for and follow the regulations for federal, state, and local taxes. This guide can help you understand the taxes that will affect you and your Colorado LLC.

Recommended: Schedule a free consultation with an accountant to stay on top of your taxes.

Colorado LLC Taxes Owed

LLCs benefit from pass-through taxation, meaning the business’s profits pass through to the members’ individual tax returns. As a result, your LLC itself does not pay taxes to the federal government or to the State of Colorado. Instead, LLC owners will pay taxes for their portion of the income they made from the LLC.

In Colorado, LLC owners can expect to pay the following taxes:

Federal Taxes

Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.

Federal Self-Employment Taxes

It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%. 

Federal Income Taxes

Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets, as well as the percent owed, will change each year.

Colorado State Taxes

Every state uses its own laws that affect how individual residents and businesses are taxed. Below are important taxes at the state level that will affect your Colorado LLC.

Colorado Income Taxes

In Colorado, the income tax rate is 4.4% making it lower than in many other states. For reference, most states sit between 6-7% while a few exceed even 10%.

More information on the Income Taxes for Colorado is available on the Colorado Department of Revenue website.

Colorado Sales and Use Tax

Colorado has a state sales tax rate of 2.9%, making it the lowest state-level sales tax rate (that is not 0%) in the US. Some cities and counties in the state impose their own local sales tax rates, which average 4.87%. This low sales tax rate makes Colorado quite an attractive place to establish a business.

A full breakdown of the state’s sales and use tax is available on the Colorado Department of Revenue website.

Register for a Colorado Sales Tax License

If your LLC sells products to consumers, you will likely need to file a Sales and Use Tax Return. Doing so will give your business the appropriate license, and you will need to pay the tax yearly. Applying for the Sales Tax License will cost a total of $66 for the deposit and license fee.

You can apply for the Sales Tax License on the Colorado Department of Revenue website.

Additional State Taxes

Colorado’s Department of Revenue oversees the collection of various taxes that businesses may have to pay depending on their location, industry, and number of employees. 

These are a few taxes that business owners in Colorado may be responsible for paying:

  • Retail Delivery Fee
  • Road Usage Fee
  • Nicotine Products Tax
  • Public Utilities Administration Fee
  • Prepaid Wireless Charge

A full list of taxes and stipulations can be found on the Tax Division portion of the Colorado Department of Revenue website.

Colorado Local Taxes

The local laws and ordinances across Colorado are likely to be different from one city to another. Regardless of where you live in Colorado, we recommend you check with your local jurisdiction and ensure that your business obtains the proper local permits and follows any local regulations that may impact your business’s operation.

Colorado LLC Compliance

You must obey Colorado’s state and local laws to maintain your business's compliance and good standing. 

Colorado LLC Periodic Report

Much like the annual report that many states require, Colorado has LLCs file a “periodic report” each year. 

Your LLC’s periodic report is used to keep the business in good standing with the State of Colorado as well as update the contact information associated with your business. Filing this report can only be done online and will cost the business $10 per year.

The periodic report is due each year within a five-month window. The window is from two months before the anniversary month of forming your LLC to two months after that anniversary month. If you miss the window by up to 60 days, your business will be charged a $50 late fee. This fee will be increased to $100 for filing any later than 60 days after the window closes.

For more information, check out our Colorado LLC Periodic Report guide.

LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure that you handle your business taxes correctly.