What taxes apply to a new small business?

Taxes for New Small Businesses in Colorado

When starting a small business in Colorado, understanding your tax obligations helps ensure smooth operations and compliance. Below are the key taxes you should be aware of:

State Income Tax

Colorado imposes a flat state income tax rate on business income. As of 2026, businesses must report income earned within the state and pay the corresponding tax. This applies to sole proprietorships, partnerships, LLCs, and corporations.

Sales and Use Tax

If your business sells tangible goods or certain services, you must collect Colorado sales tax from customers. Additionally, use tax applies to items purchased out-of-state for business use without paying sales tax. Register for a sales tax license with the Colorado Department of Revenue and file regular returns.

Employment Taxes

If you hire employees, you are responsible for payroll taxes including:

• Federal and state income tax withholding
• Social Security and Medicare taxes (FICA)
• Federal and state unemployment insurance taxes
• Colorado’s specific payroll tax filings and reporting

Setting up payroll systems and automating tax withholdings can improve compliance and reduce errors.

Other Applicable Taxes

• Excise Taxes: Depending on your business type (e.g., fuel, tobacco), excise taxes may apply.
• Property Tax: If you own business property or real estate, local property taxes will apply.

Operational Recommendations

• Register your business with the Colorado Secretary of State and obtain necessary tax accounts through the Colorado Department of Revenue.
• Maintain accurate bookkeeping to track taxable sales, payroll, and expenses.
• Use accounting software that integrates tax calculations and filing reminders.
• Consult Colorado’s Department of Revenue website regularly for updates on tax rates and filing deadlines.