Doing business in Colorado? Check for OPT!

What is it? Does it apply to me?

An Occupation Privilege Tax “OPT” is a head tax. It is generally imposed upon employees and businesses or business owners for the privilege of doing business in some Colorado Home-Rule Cities such as Aurora, Denver, Glendale, Greenwood Village, and Sheridan. Like use tax, OPT is often an unknown tax until an auditor assess tax, interest and penalties. There are generally thresholds for tax on employees, but a business or business owner may have a tax imposed for each month in which that entity has any activity in a city related to its business, trade, occupation, or profession, regardless of whether a permanent location is maintained in that city.

In Denver, for example, employees who perform sufficient services in Denver to receive compensation of at least $500 per month meet the requirement of a taxable employee and are liable for the Employee OPT to be withheld by the employer at a rate of $5.75 per month. The employer is also required to pay the Business OPT at a rate of $4.00 per month for each taxable employee. Additionally, the employer is required to pay the Business OPT at a rate of $4.00 per month for each owner, partner, or manager engaged in business in Denver regardless of how much they earn.

What if I already pay OPT to one city?

There may be an exemption if you already pay OPT to one city. If your city doesn’t charge OPT, but you do business in cities that do, review the requirements and plan to pay OPT to the city where your employees spend the most time outside of your location’s city.

What should you do?

Find out if cities you do business in charge an Occupation Privilege Tax and the requirements, if applicable. If you utilize a payroll company, ensure they are withholding and remitting OPT.

The information in this tax tip addresses issues in general. Any potential results discussed may vary and circumstances may warrant more or less favorable outcomes.

It’s best to be proactive and to identify and resolve issues before an auditor contacts you. Voluntary Disclosure Agreements are no longer available once you’ve been contacted.

The good news is that remedies are often available when you’ve discovered obligations before auditors contact you. Anonymous Voluntary Disclosure is one option. Even if you are already under audit, we can often help. See our Audit Case Studies.

To learn more about how we can help with these or the following issues, please Contact us today:

• Assistance with proactive minimization of prior period sales/use tax liabilities
• Help with nexus questions and issues
• Other sales and use tax related questions

What are your priority issues and when do you want them resolved?

Please click here for more Sales Tax Tips. For additional insight on common sales tax concerns, please see the Did You Know? section of our website.

* This tip is intended to provide general information only and is not to be considered as a substitute for professional advice.