Colorado Basic Business Taxes 2010
Colorado's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include unemployment taxes and worker's compensation, investment tax credits, and enterprise zone tax credits.
Net income allocated and apportioned to the state is taxed at 4.63 percent. For tax periods commencing on or after January 1, 2009, income is generally apportioned based on a method new to Colorado, the single factor apportionment method. All business income is apportioned to Colorado by multiplying such business income by a fraction, the numerator of which is the total sales of the taxpayer in Colorado and the denominator of which is the total sales of the taxpayer everywhere during the tax period.
Corporate income tax credits include child-care programs, a credit for the use of alternative fuels, qualified school-to-career expenditures, credits for rehabilitation/ restoration of historic buildings and investment tax credits. Additional credits apply in enterprise zones.
Sales and use taxes:
Colorado collects a 2.9 percent sales or use tax on goods purchased by a business that are not intended for resale. Local governments may collect up to an additional five percent sales tax. The statewide average sales tax is 6.5 percent.
Services are not taxed. Only sales of non-food items are taxed.
State sales or use taxes on manufacturing equipment or machine tools are not collected on purchases over $500. Additionally, sales or use taxes are not collected on component parts, fuels and electricity, ink and newsprint, packaging materials, general maintenance aircraft parts, farm equipment and machinery, clean-fuel vehicles or biotech equipment. Biotech research and development is eligible for sales and use tax refund.
Unemployment taxes and workers' compensation:
An employer's unemployment insurance tax liability is based on the taxable wage base, which is the first $10,000 of each worker's wages. If covered for the first time, the tax rate will be 1.7 percent of the wage base plus an annually computed surtax (0.22 percent), plus a solvency surcharge of 0.6 percent for a total of 2.52 percent. After one full year of coverage, the tax rate will be calculated based upon the employer's individual experience.
Workers' compensation insurance is provided by over 200 private companies and the state's Compensation Insurance Fund, dba Pinnacol Assurance, which carries coverage for the majority of Colorado employers. Self-insurance is an option, available by special permit specifying strict financial and loss control standards, for companies employing 300 or more Colorado workers.
Property taxes are not levied by state government. These revenues are exclusively for local government services, primarily school districts.
Commercial and industrial real and personal property is assessed for property tax purposes at 29 percent of market value. Personal property (furniture, fixtures and equipment) used in commercial and industrial operations is subject to personal property tax. If total personal property is valued under $4,000, it is exempt. This exemption threshold will increase to $5,500 beginning January 1, 2011, and rise to $7,000 as of January 1, 2013.
Business personal property with an economic life of one year or less (consumables), or with an acquisition cost of less than $250, is exempt. Computer and telecommunications equipment have accelerated depreciation schedules. Local governments have the option to negotiate up to a 50 percent rebate or credit on personal property tax as an economic development incentive.
Local governments in enterprise zones have the option of providing new companies with a rebate or credit not to exceed the difference in property taxes after development less the property taxes prior to zone designation.
Inventory taxes are not assessed in the state.
Colorado levies a tax upon the severance from the earth of metallic minerals and energy resources ranging from two to five percent, based upon the gross income of the extraction operation or upon the amount extracted. The tax is reduced by a credit for 87.5 percent of local property taxes paid, and low-producing "stripper wells" are exempt.
Investment tax credits:
Business investments qualifying under the former federal guidelines for an investment tax credit qualify for a one percent investment tax credit in Colorado, up to a maximum credit of $1,000 in any tax year. Excess credits may be carried forward three years.
Effective January 1, 2010, the Colorado Innovation Investment Tax Credit provides a state income tax credit of 15 percent, up to a $20,000 maximum, for qualified investors who make investments in small, qualified Colorado businesses involved primarily in research and development or manufacturing of new technologies, products or processes.
Enterprise zone tax credits:
Businesses making investments in equipment used exclusively in an enterprise zone may claim a credit against their Colorado income taxes equal to three percent of the amount of the investment, up to a maximum of $5,000 in any tax year, plus 50 percent of the tax liability above $5,000. Excess credits may be carried forward 12 years or back three years.
A new or expanded business facility located in an enterprise zone is entitled to an income tax credit of $500 per new employee. An additional $500 per new business facility employee may be claimed by businesses that add value to agricultural commodities through manufacturing or processing.
In certain designated "Enhanced Rural EZ" counties, additional job credits of $2,500 per new job or $3,500 per new agriculture processing job are available.
An additional credit of $200 per employee during the first two years in the zone may be claimed for employees covered by a company-sponsored health insurance plan. A minimum of 50 percent of the cost must be paid by the company.
Employers who carry out a qualified job-training program for their enterprise zone employees may claim an income tax credit of 10 percent of their eligible training expenses. A qualified training program means a structured training or basic education program to improve the job skills of employees. Training may be done either on or off the employer's site. It may be conducted by the taxpayer or contracted to another entity. The trainees must be working predominantly within an enterprise zone.
There is a credit of 25 percent of qualified expenditures up to $50,000 to rehabilitate buildings that are at least 20 years old and have been vacant at least two years.
There is a 25 percent credit up to $100,000 for private contributions to local zone administrators or approved nonprofit organizations for enterprise zone development projects.
There is an income tax credit for private expenditures on research and experimental activities (as defined by federal tax law) conducted in an enterprise zone. It is equal to three percent of the amount of the increase in the taxpayer's research and development expenditures within the zone for the current tax year above a base level.
Colorado State Contact:
State of Colorado
Office of Economic Development
1625 Broadway, Suite 2700
Denver, CO 80202
Fax: (303) 892-3848
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.
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