Colorado Basic Business Taxes 2011
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.
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