Hiring your first employee in Colorado

What do you have to register for before your first payroll?

Colorado does not issue one combined payroll account. Wage withholding is a Department of Revenue account, unemployment is a Department of Labor account, and paid family leave is a third account with its own division. The state's business portal lets you open the Secretary of State, Revenue and Labor registrations in a single pass, which is why people assume it is one account, but you still get separate numbers and file separate returns. Paid family leave is not in that portal at all and must be registered separately.

Does Colorado require income tax withholding?

Yes. You register with the Colorado Department of Revenue, before remitting the first colorado wage withholding.

You withhold whenever the pay is subject to federal withholding and the worker is either a Colorado resident, wherever they work, or a nonresident performing services inside Colorado. The account is free and never needs renewing, but once it exists you must file for every period even when the tax due is zero, or the state issues non-filer notices. Check the city as well as the state: Denver levies an occupational privilege tax withheld from each employee earning at least $500 a month in the city, plus an employer share for that same employee, registered and filed with the city rather than the state.

What unemployment insurance does Colorado charge a new employer?

A new Colorado employer pays 3.05% on the first $30,600 each employee earns, so roughly $933 per employee in the first year. You become liable once you pay $1,500 of wages in any calendar quarter, or employ at least one person for any part of a day in 20 weeks, in the current or prior year. New employers pay an introductory rate for their first year, three years in construction, and for 2026 that is 3.05% for non-construction and general construction, built from a beginning rate, a support rate and a solvency surcharge. Heavy construction is much higher at 6.285%, so check your classification before budgeting. Premiums are owed on the first $30,600 of wages in 2026, up from $27,200 in 2025, and both the base and the rate tables reset every December.

Do you need workers compensation insurance in Colorado?

Yes, from your first employee. Colorado sets no headcount to reach, so there is no free window before coverage is required.

Colorado requires coverage from the very first employee, and counts part-time workers and family members as employees. Anyone paid for their services is presumed an employee unless they fit a narrow independent contractor exemption, so misclassifying a contractor is the usual way an employer ends up uninsured without realising it. Fines run up to $500 for every day without coverage, the state can shut the business down, and if someone is injured while you are uninsured you pay the claim yourself plus a penalty worth 25% of the worker's benefits.

How quickly must you report a new hire in Colorado?

Within 20 calendar days of the date of hire, or by the first regularly scheduled payroll after that window closes. Reports go to the Colorado State Directory of New Hires.

Reports go through a separate state portal from your unemployment and withholding accounts. This is the obligation employers most often skip because nothing bills them for it, but it is what funds child support enforcement and the state does audit it.

Does Colorado have paid family leave or state disability insurance?

Colorado's paid family and medical leave programme is funded by a premium of 0.88% of wages for 2026, down from 0.9% in 2025, split evenly at 0.44% each between employer and employee, stopping at the federal Social Security wage cap. Employers with nine or fewer employees are excused from the employer half, but the headcount counts every employee nationwide rather than just the Colorado ones, so a twelve person company with three people in Colorado pays the full rate. Every employer with at least one covered Colorado employee must register and refresh its headcount by the end of February each year, because a missed update makes the state assume you have ten or more and bill you accordingly.

Do you need a sales tax permit in Colorado?

The state retail licence is a two year licence expiring at the end of every odd numbered year, and the fee is prorated by when you apply, from $16 down to $4. The real trap is that this licence only covers the state and the local jurisdictions the state collects for. Colorado's home rule cities administer their own sales tax, write their own rules about what is taxable, and generally require their own licence and their own return, so one remote seller can end up registered with the state plus several individual cities. The state's filing system covers only the home rule cities that opted in; the rest must be contacted and paid directly.

Security deposits. A new account must send a $50 deposit with the application, refunded automatically once the business has remitted $50 of state sales tax, so a first licence usually costs $66 up front.

Does a marketplace like Amazon or Etsy handle the tax for you?

A marketplace facilitator must collect and remit all applicable state and state-administered local sales tax on sales made through its marketplace. If you sell only through marketplaces and the facilitator is collecting everything due, you can be exempt from holding a Colorado licence and filing returns at all. Selling through a marketplace and also selling direct makes you a multichannel seller, and the direct sales are still entirely your problem.

If your sales drop, when can you stop collecting?

Colorado runs on a calendar year lookback rather than a named trailing nexus rule. If your sales into Colorado exceeded the threshold in the previous calendar year, you are subject to licensing and collection for the entire current calendar year, no matter how little you sell during it. So a good year followed by a quiet one still means twelve more months of registration, returns and home rule filings, and you cannot close the account the moment sales drop off.

Does Colorado charge a tax on revenue rather than profit?

Colorado has no gross receipts tax on business revenue. The Department of Revenue's list of business tax types runs to sales and use, business income, wage withholding, excise and fuel, and severance, with nothing resembling Washington's B&O or Ohio's commercial activity tax. Business profits are taxed through the regular corporate or pass-through income tax instead.

Do you have to register your out-of-state company in Colorado?

Statement of Foreign Entity Authority, $100, filed online. Colorado charges the same whether the entity is an LLC or a corporation and does not scale it with authorized shares. Withdrawing later costs $10.

Colorado accepts this filing online only, with no paper version of the form. Registering here is separate from your tax and payroll accounts: qualifying with the Secretary of State does not open a withholding, unemployment or paid leave account, and opening those does not qualify you to do business.

Where these figures come from

Every number on this page was read on Colorado's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.