Multi-state Income Taxes | Companies expanding into Colorado

Multi-state Income Taxes | Companies expanding into Colorado

If you’re starting a business venture in Colorado, you can rest in knowing that you probably won’t struggle to find a reliable workforce of people. Colorado’s economy is also dynamic with a number of booming sectors. The state remains established in distillery, mining, oil and gas, finance and many other traditional sectors. It also favors high-tech industries that include aerospace, bioscience, and engineering. Additionally, the state also offers access to global markets, making it easy for businesses to service multistate businesses.

Multi-state Income Taxes | Companies expanding into Colorado

  • S Corporations

    • Filing Requirements
      • Colorado S corps are required to file a federal tax return. The Colorado tax return will refer to what you put down on your federal tax return, so the federal return should be completed first. S corps must file form 1120S with the IRS. As a pass-through entity, the company does not pay corporate tax on the income. Instead, the income is passed through to the shareholders, who must report the income on their personal taxes. The S corp must distribute 1120S Schedule K-1 to every shareholder. Schedule K-1 will show each shareholder his portion of the company’s profits, deductions and credits for use on their personal tax returns.
    • Allocation and Apportionment
      • Allocation: One Factor Formula: Sales Factor
      • Market-based apportionment
        • Beginning January 1, 2019, Colorado began using a market-based sourcing rule instead of a cost-of-performance rule to apportion receipts from the sale, lease, license, or rental of intangible property. Under the market-based sourcing rule, receipts from the sale of intangible property are sourced to Colorado if the taxpayer’s market for the sales is in Colorado. The taxpayer’s market for sales is in Colorado to the extent the intangible property that is sold, rented, leased, or licensed is used in-state.
  • Partnerships

    • Filing Requirements
        • A partnership or S corporation may file a composite income tax return for its nonresident partners or shareholders, as a simplified way of paying the income tax owed by those partners or shareholders. A Colorado Partnership and S Corporation and Composite Nonresident Income Tax Return (DR 0106) replaces the separate Colorado partnership and S corporation income tax returns for each partner or shareholder listed on the composite return.
        • Each nonresident partner or shareholder may elect to be included or excluded from the composite filling. If a nonresident partner or shareholder elects to be excluded from this composite filing, then the following forms must be completed and submitted to the Department:
          1. The nonresident partner or shareholder can provide a completed Colorado Nonresident Partner/Shareholder Agreement (DR 0107) to establish that the nonresident partner or shareholder will report the Colorado source income and pay the Colorado tax on any income derived from a Colorado partnership or S corporation on an individually filed Colorado income tax return.
          2. If nonresident partners or shareholders do not provide a completed DR 0107, then the partnership or S corporation must file a Statement of Colorado Tax Remittance for Nonresident Partner or Shareholder (DR 0108). Payment should be included with the filed DR 0108, if tax is assessed on the Colorado sourced income for the nonresident partner or shareholder
    • Allocation & apportionment
      • Allocation: Single-sales factor
      • Income is generally apportioned using the single-sales method. When using the single-sales method of apportionment, all business income must be apportioned using the single-sales factor. Non-business income may either be directly allocated to the appropriate state or treated as business income, subject to the single-sales factor apportionment. Complete and include Part IV of the DR 0106 with your return if you are apportioning income using the single-sales factor apportionment method.
      • Colorado-Sourced Income of a Nonresident: Colorado-sourced income apportioned under §39-22-109, C.R.S., is computed by including income that is determined to be from Colorado sources. Include a schedule to form DR 0106 explaining how Colorado sourced income was determined. You should also include Part III of your return. Modifications may be sourced to Colorado only to the extent that the income to which they relate is sourced to Colorado.
  • Employees & individual filers

    You must file a Colorado income tax return if during the year you were:

    • A full-year resident of Colorado, or
    • A part-year resident of Colorado with taxable income during that part of the year you were a resident, or
    • A nonresident of Colorado with Colorado source income,


    • You are required to file a federal income tax return, or
    • You have a Colorado income tax liability for the year.

    A Colorado resident is a person who has made a home in Colorado, or a person whose intention is to be a Colorado resident. The department will consider, among other things, Colorado voter registration, Colorado vehicle registration, Colorado driver’s license, school registration, property ownership, and residence of spouse or children in determining intention to be a Colorado resident.

Download our Multi-State Tax Filing Requirements Guide

Understanding Business Climate and Tax Implications of Other States​

Ensuring Accurate Tax Filing

Keeping a handle on these different laws and tax implications might be difficult for your staff members but can be accomplished by outsourcing a CPA. Allow an expert who deals with business structuring, accounting, and taxation regularly set up accounting software to factor in applicable tax laws for each US state.

Fusion CPA recently expanded into new states bringing us firsthand experience and knowledge. We have a team of certified public accountants who are highly skilled in handling multistate taxes. Our team of professionals understands the federal and state laws in various states and jurisdictions.


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This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.