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Colorado Taxation

Colorado Taxation

Posted on September 28, 2014


Many states tax no less than a few kinds of business income originating from the state (Steingold, “Colorado State Business Income Tax”). Most of the time, the information of how earnings from a particular business is taxed rely partially on the business’ lawful manner. More specifically, in many states, companies are exposed to a corporate income tax, whereas earnings from “pass-through entities” like S corporations, limited liability companies (LLCs), partnerships, and sole proprietorships is dependent on a state’s exclusive income tax. Both corporate and personal income tax rates differ extensively between states. Corporate rates, which more frequently are fixed despite the income amount, usually vary from four to nine percent and personal rates, which usually differ conditional on the income amount, can vary from zero – for minute amounts of chargeable earnings—to about at least nine percent in a few states.

Some states possess no complete income tax and some other states posses no personal income tax.

With the exception of taxing business income by means of a corporate or personal income tax, most states enforce a distinct tax on no less than a few businesses, occasionally termed a “franchise tax” or “privilege tax.” This is often described as a tax only for the entitlement or “freedom” of conducting business in Colorado. As with Colorado state business income taxes, the information of a state’s franchise tax frequently rely partially on the business’ lawful manner. Franchise taxes are usually either a fixed charge or an amount based on a company’s remaining value.


Colorado possesses a corporate income tax in addition to an alternative tax on overall proceeds. Though, unlike most states, Colorado does have neither any franchise nor privilege tax usually appropriate to businesses. Therefore, primarily, unless your business is a conventional company – a C corporation – the business itself will be indebted no state tax on its earnings or overall value. Though, if earnings from you business traverses to you individually, those earnings will be dependent on taxation on your personal state tax return.

Colorado taxes corporations’ net income at a fixed rate of 4.63%. This is similar to the state’s tax rate on personal income – not including the complementary minimum tax that is a factor in the state’s personal income tax as well. State tax returns are expected on the fourth month’s fifteenth day subsequent to the end of the tax year. For businesses whose tax year is consistent with the calendar year this indicates returns are expected on April 15th.

For specific taxpayers, Colorado provides a gross receipts tax as an option to the income tax. The qualifications for such a tax are as follows:

  • The taxpayer’s sole action in Colorado should be selling
  • The taxpayer’s Colorado transactions must add up to at most $100,000
  • The taxpayer cannot lease or possess Colorado real estate

The following are five of the most frequent types of Colorado business:

  • Colorado corporations are dependent on Colorado’s corporate income tax at a 4.63 % rate. Specific corporations might be eligible for the alternative tax on gross receipts.


  • S Corporations. An S corporation is constructed by initially establishing a conventional corporation and then filing a exclusive document with the IRS to opt for “S” standing. Unlike a customary corporation, an S corporation usually is not dependent on distinctive federal income tax. Instead, corporations are “navigating” bodies. Be aware of that a shareholder’s share of the S corporation’s earnings must not really be issued to the shareholder in order for the shareholder to be indebted tax on that amount. Colorado acknowledges the federal S election, and Colorado S corporations are not expected to reimburse tax to the state. On the other hand, separate S corporation shareholders will be indebted to tax on their share of the corporation’s earnings.
  • Limited Liability Companies (LLCs): Akin to S corporations, typical LLCs are navigating bodies and are not expected to reimburse income tax to either the federal or Colorado state governments. Rather, the business earnings are issued to separate LLC members, who will then compensate federal and state taxes on the amount issued to them.

Be aware of whereas through failure to pay LLCs are categorized for tax reasons as partnerships – or, lone-member LLCs, “overlooked bodies”, election is possible in order to have your LLC categorized as a corporation. In that instance, the LLC would be susceptible to Colorado’s corporate income tax as well.

  • Partnerships: Partnership earnings are issued to the separate partners, who then reimburse tax on the amount issued to them on both their federal and state tax returns.
  • Sole Proprietorships: Your business earnings will be issued to you as sole proprietor, and you will reimburse tax to the state on those earnings.


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