Registration Requirements in Colorado
Corporations, partnerships, and sole proprietors that will engage in business under a name other than a legal name must register with the Colorado Secretary of State. The required forms can be filed online at the following link.
Most businesses in Colorado will also need to register with the Colorado Department of Revenue. To do this businesses can fill out Colorado form CR0100 - Colorado Business Registration. The form can be found at the following link.
S Corporation Tax
Colorado recognizes the federal S-election, and Colorado S corporations are not required to pay tax to the state. However, individual S corporation shareholders will owe tax on their share of the corporation’s income. All pass through entities still need to file Colorado form 106.
LLCs and partnerships are not required to pay income tax to Colorado. Instead, income from the business is distributed to individual LLC members or partners, who then pay Colorado income tax on that amount on their personal return. All pass through entities still need to file Colorado form 106.
S corporations and partnerships in Colorado may file a composite return on Form 106 for its qualified nonresident partners/shareholders in lieu of paying and filing the income tax owed by them. The composite return replaces the need to file an individual income tax return. The tax paid on composite returns is 4.63% of Colorado taxable income.
Individual Income Tax
Colorado is a rolling conformity state that automatically adopts provisions of the Internal Revenue Code as enacted on a prospective basis. This simply means that any changes that the IRC enacts after the last day of that taxable year that would affect federal taxes will not apply to Colorado.
The calculation of taxable income starts with federal taxable income and allows their own state defined additions and subtractions to arrive at Colorado taxable income.
Since the income tax calculation begins with the federal income tax, the Internal Revenue Code (IRC) Section 199A, also known as the QBI deduction, is already included in the calculation and Colorado does not require any adjustments to remove the deduction.
Shareholders and partners with income assignable to Colorado may need to file an individual income tax return that reflects their portion of Colorado income. The individual income tax rate for Colorado is a flat rate at 4.63%. Individual income tax returns are filed on form 104 - Colorado Individual Income Tax.
For fiscal year businesses, returns are due by the 15th day of the fourth month after the close of the tax year.
For Calendar year filers and individuals, returns are due on April 15th. If the due date falls on a weekend/holiday, the return will be due on the next business day.
Estimated Payment Requirements
Generally, you must pay estimated tax payments in Colorado if you expect to owe more than $1,000 in net tax after subtracting credits and withholding.
Estimated payments are made quarterly and are due on the 15th day of the April, June, September during the tax year, and the 15th of January following tax year.
Estimated payments for individuals are made using Colorado form 104EP. This form can be found at the following link.
Estimated payments for composite tax are made using Colorado form 106EP. This form can be found at the following link.
If you are unable to file your return by the due date, Colorado does allow for an extension to file. In order to receive this extension you must fill out Colorado form 158-I for individuals or 158-N for composite non-resident and send them along with an extension payment. This will allow for a 6 month extension for both businesses and individuals.
Form 158-I can be found here
Form 158-N can be found here
Pass through entities and individuals must pay 90% of their tax liability by the original due date. If this is not paid, a penalty of $5 or 5% of net tax due for the first month after the due date and increased by 0.5% each month thereafter will be assessed. With a maximum penalty of 12%. Interest is also due on any unpaid tax balance after the due date. The rate is 4%, but increases to 7% for any amount not paid after 30 days.
If your business was formed or is located in another state, but generates income in Colorado, it may be subject to Colorado taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.
Colorado Department of Revenue:
Colorado Secretary of State: