A handful of cities in Colorado have a local tax called an occupational privilege tax. Both employees and employers owe it. If you’re an employer in Colorado, it’s important to know if you owe the occupational privilege tax and what your city requirements are.
What is occupational privilege tax?
Occupational privilege taxes (OPT) in Colorado are head taxes on workers. This means that each qualifying employee must pay the tax. And, the employer must also pay a portion.
Each city sets an income threshold to determine which employees are subject to the tax. The threshold is the minimum amount an employee must earn per month in the city. Once the employee reaches the minimum amount of pay, the employee and employer are subject to the OPT for the month.
OPT is paid at a flat rate. This means you withhold and contribute a set dollar amount instead of paying a percentage of employee wages.
The taxes are levied based on the city where work is performed, not based on where the business is located or where the employee lives. Not all cities in Colorado have an OPT.
Occupational privilege taxes can get complicated if an employee works at multiple locations or has multiple jobs. Follow the tax laws of the city where the employee works.
Cities with an occupational privilege tax
Five cities in Colorado have an OPT: Aurora, Denver, Glendale, Greenwood Village, and Sheridan.
Aurora occupational privilege tax
If you had employees who worked in Aurora and earned at least $250 in gross wages during the month, you owe OPT.
Employees and employers are both subject to an OPT of $2 per month. Withhold $2 per month from the wages of qualifying employees. And, contribute $2 per month for every qualifying employee.
If an employee performs work in Aurora and another city that collects OPT, the employee and employer OPT are both due to the city where the employee worked more hours. For example, one month an employee works 90 hours in Denver and 70 hours in Aurora. Both portions of the OPT would be due to Denver because it also imposes an OPT and the employee worked more hours there.
If an employee has more than one Aurora employer, the employee can avoid paying OPT twice. The employee might give you a Withholding Certificate/AOPT Form to request that you don’t withhold the OPT. Even if the employee requests that you don’t withhold the tax, both employers must still pay the employer portion of the OPT.
You will file on a monthly or quarterly basis. If you have more than 25 employees, file monthly. If you have fewer than 25 employees, file quarterly.
For more information about occupational privilege tax in Aurora, visit the city of Aurora website.
Denver occupational privilege tax
The City and County of Denver occupational privilege tax is owed on employees who earn at least $500 in gross wages in a calendar month from work done within the city.
The employee OPT is $5.75 per month. You will withhold this amount from each qualifying employee’s wages. The business OPT is $4 per month per qualifying employee.
Employees do not need to live in Denver to be liable for the tax. And, your business doesn’t need to be located in Denver. As long as an employee performs work in Denver, you and the employee are liable for the OPT.
Even if you don’t have employees, you might be subject to the business portion of the Denver OPT. For a sole proprietorship or a partnership, pay only the business portion ($4) for each owner or partner each month they perform any business in Denver. The income threshold doesn’t apply, so pay the business OPT for owners and partners, regardless of how much they earn.
If an employee works in Denver for you and another business, the employee only needs to pay the OPT once. The employee might give you Form TD269 to request that you don’t withhold the OPT from their wages. However, both businesses must pay the business OPT.
You must register for a Denver OPT tax license. You can use a paper form or register online using the Denver eBiz Tax Center.
You will have a monthly, quarterly, or annual filing period. If your business has 10 or more employees, file a monthly return. If your business has fewer than 10 employees, file a quarterly return. If you are a sole proprietor or partnership with no employees who are subject to the OPT, file an annual return. You can get these Denver OPT tax forms from the Denver Treasury Division.
To learn more about the Denver OPT, check out the frequently asked questions on Denver’s website.
Glendale occupational privilege tax
The Glendale OPT applies to employees who earned at least $750 during a month working in the city.
The OPT is $5 for both employees and employers. You will withhold $5 from qualifying employee wages, and you will contribute $5 for every qualifying employee.
People who are self-employed, owners, partners, or officers and they are not paid a salary or commission are subject to the employer OPT. The wage threshold does not apply to these individuals.
You will need to file your taxes on a monthly, quarterly, or annual basis.
To get more information about the Glendale OPT, visit the City of Glendale website.
Greenwood Village occupational privilege tax
In Greenwood Village, the occupational privilege tax applies to employees who earn at least $250 during a month.
Employees and employers both owe $2 in tax. You will withhold $2 from qualifying employee wages per month. And, you will pay $2 per month for every qualifying employee.
The wage threshold doesn’t apply to owners, partners, and officers. The business OPT must be remitted no matter what these individuals earn.
If an employee works in more than one city with an OPT, pay the OPT to the city where the employee worked the most.
If an employee has more than one employer, only their primary employer should withhold the tax.
All businesses in Greenwood Village need an OPT license. If your business isn’t located in Greenwood Village, but the tax applies to an employee, you will also need a license. Fill out and mail the paper application.
Every year, the city mails coupon books to licensed businesses. Use the coupons to remit your OPT.
For more information about the Greenwood Village OPT, visit the Greenwood Village website.
Sheridan occupational privilege tax
The city of Sheridan occupational privilege tax is $3 per month for both employees and employers. Withhold $3 from each employee’s wages and contribute a matching $3.
You will remit the OPT on a monthly or quarterly basis.
For more information, visit the City of Sheridan website.
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This article has been updated from its original publication date of February 14, 2018.This is not intended as legal advice; for more information, please click here.