Denver Charges a Head Tax on Every Worker Who Earns $500 in a Month, Owners Included

2026-10-17 · RKube Services

Denver's Occupational Privilege Tax is $5.75 per worker plus $4 per employer each month once someone earns $500 in the city, owners included. Who owes it, how the $500 test works, and when returns are due.

Hire your first employee in Denver and you'll run into a tax most payroll checklists skip. Denver charges a monthly head tax called the Occupational Privilege Tax, or OPT. It's small per person, $9.75 a month in total, but it applies to almost every business working in the city, it includes owners, and it has its own return separate from Colorado state payroll filings.

This guide is based on Denver's Tax Guide Topic No. 61 (revised April 2026) and the Treasury Division's business tax page. It covers who owes it, how the $500 test works, how owners of LLCs, partnerships and corporations are treated, when returns are due, and a worked example for a small Denver company.

The two OPT taxes in one table

Sources: Denver Tax Guide Topic No. 61, Occupational Privilege Taxes and the Denver Treasury business tax page.

The $500 test, month by month

An employee is taxable for a month when they perform enough services in Denver to receive at least $500 of compensation for that calendar month. It's a monthly test, so it's checked twelve separate times a year.

A few points from the tax guide that matter for payroll:

• The test is about work done in Denver, not where the company is based. A plumbing company in Golden, CO whose technician earns $1,520 on Denver jobs in May owes $9.75 for that technician for May. The same company owes nothing for a crew that spent the month on a Grand Junction project, even though they're Denver-based employees in every other sense.
• It's about compensation earned, not when the check is cut. In one of Denver's own examples, two corporate employee-owners who are paid a single annual salary on December 31, or even skip salary in a bad year, are still taxable for all twelve months because their accrued pay for each month cleared $500.
• Part-time staff who earn under $500 in Denver in a given month aren't taxable for that month. Track it, because a holiday month with extra shifts can push someone over.

Owners: where most small businesses get it wrong

The Business OPT applies to owners, partners and managers engaged in business in Denver regardless of how much they earn. The $500 test doesn't apply to them because they aren't employees.

How Denver classifies your owners depends on the entity, and for LLCs it follows the IRS classification:

• Corporation (C or S): A corporation has employees, not working owners. Shareholders who work in the business and are paid are employees, so they're subject to both the $5.75 Employee OPT (if they clear $500) and the $4.00 Business OPT.
• Partnership, or an LLC taxed as one: All working members are taxed as owners. The business pays $4.00 per month for each, and there's no Employee OPT on them.
• Single-member LLC (disregarded entity): The single member is taxed as an owner, so the business pays $4.00 per month.
• Sole proprietor: Taxed as an owner, $4.00 per month.

Two more rules close the gaps. A business owes the Business OPT for each owner even if that person already pays the Employee OPT through a job somewhere else. And any business with activity in Denver owes at least $4.00 a month, even with no permanent location in the city and no taxable employees. Denver's example is a shell corporation whose functions are all performed by a sister company's staff: it still owes $4.00 a month.

Workers in more than one place

Colorado has other cities with a head tax, Aurora among them. The rules differ depending on how many employers are involved.

One employer, two OPT cities

The employee and the employer pay only in the city where the employee spent most of their working hours that month. In Denver's example, a worker with 88 hours in Denver and 80 in Aurora pays Denver.

One employer, Denver plus a city with no OPT

There's no exemption. If the employee clears $500 for Denver work that month, Denver OPT applies, even if most of their time was elsewhere.

Two employers in Denver

The employee pays the $5.75 only once. They give Form TD269 to the secondary employer, which then stops withholding the Employee OPT. The secondary employer still pays its own $4.00 Business OPT for that employee. Denver's guide says the form is available by calling 720-913-9400.

Two employers in two OPT cities

The employee can owe the employee tax in each city if they meet each city's earnings test.

Who's exempt

• Governmental and charitable organizations are exempt from the Business OPT for employees doing work consistent with their exempt status. They still withhold and remit the $5.75 Employee OPT. Denver's example is a 501(c)(3) with an exemption letter from the city.
• Households that hire domestic employees must withhold the Employee OPT but don't owe the Business OPT, since a household isn't engaged in business. A self-employed domestic worker sets up their own OPT account and pays the $4.00 Business OPT for themselves.

Registering and filing

You register for an OPT account and file returns through Denver's eBiz Tax Center, which handles all Denver taxes except sales and use tax filed through Colorado's SUTS portal. OPT can't go through SUTS.

Filing frequency depends on headcount:

For a calendar quarter, that means returns due April 30, July 31, October 31 and January 31. The fourth quarter of 2026 return and payment are due January 31, 2027 for a quarterly filer, and so is the annual payment for a no-employee sole proprietor or partnership choosing the yearly option.

Payments can be made online by electronic check without a fee. Card payments online carry a 2.5% service fee as of May 1, 2025. If you mail a check, OPT has its own lockbox: Department of Finance, Treasury Division, PO Box 660859, Dallas, TX 75266-0859, payable to the Manager of Finance. Other Denver business taxes go to a different PO box, so don't mix them.

Late returns and payments pick up penalty and interest under the Denver Revised Municipal Code, and periods left unfiled get harder to clean up the longer they sit.

Worked example: a Denver S corporation, fourth quarter 2026

A marketing agency in the RiNo neighborhood of Denver, CO is an S corporation with one shareholder who works full time and draws a salary. It has three full-time staff and one part-timer. In the fourth quarter of 2026:

• The shareholder and the three full-time staff each earn well over $500 in Denver every month.
• The part-timer earns $650 in October, $420 in November and $700 in December.

The quarterly return due January 31, 2027 reports $136.50 in total. The $80.50 should already have come out of paychecks, $5.75 per taxable month per person. If payroll missed it, the agency owes the full amount anyway, and getting it back from staff after the fact is awkward.

Now change one fact. If the agency were an LLC taxed as a partnership with the same owner working in it, the owner would count as a partner: $4.00 a month in Business OPT and no Employee OPT. The quarter would come to $119.25 instead.

These figures are an illustration, not a calculation for any real business.

The state side runs on separate accounts

Denver OPT is only the city layer. The Colorado Department of Revenue runs state wage withholding through its own account and Revenue Online, with a Withholding Tax Guide and Form DR 0004, the Colorado Employee Withholding Certificate. That same state page points employers to two more separate registrations: unemployment insurance and the Family and Medical Leave Insurance program (FAMLI). None of these replace the OPT account, and the OPT account doesn't replace them. For tax year 2026, a new Denver employer usually needs all four, on top of the federal payroll setup in IRS Publication 15, the Employer's Tax Guide.

Setting it up in payroll

Most payroll software can handle Denver OPT, but only if someone turns it on and assigns work locations correctly. A clean setup looks like this:

1. Register the OPT account in eBiz before the first payroll with Denver work.
2. Add the $5.75 employee deduction as a local tax and the $4.00 employer charge as an employer tax, both conditioned on the $500 monthly test.
3. Tag each employee's work location, and for field staff, track Denver hours or earnings by month.
4. Add owners and partners who don't run through payroll to a separate monthly list, because software keyed to W-2 wages won't catch them.
5. Collect Form TD269 from anyone who says they already pay the Employee OPT at another Denver job.
6. Calendar the quarterly or monthly due dates next to your Colorado state withholding and unemployment filings.

If you're hiring for the first time, our first employee payroll setup checklist covers the federal and state side, and this OPT setup slots in as the local step.

Questions Denver owners ask

I'm a solo LLC owner working from home in Denver with no employees. Do I owe OPT? Yes. As the single member of a disregarded LLC you're treated as an owner, so the business owes $4.00 a month, $48 for the year. You can pay the full year by January 31.

My employee works from home in Lakewood but comes into our Denver office two days a week. Are they taxable? Look at what they earn for their Denver days each month. If that's $500 or more for a month, they're taxable in Denver for that month. Lakewood doesn't change the answer because Denver gives no exemption for time spent in a city without an OPT.

We're based outside Denver but do jobs in the city. Do we need an account? If any employee clears $500 for Denver work in a month, yes. And the guide says any business with activity in Denver owes the $4.00 minimum for that month.

Does the OPT show up on the W-2? Denver's guide doesn't address W-2 reporting. Many payroll systems list it in the local tax boxes, so check how yours handles it.

This guide is general information based on Denver Tax Guide Topic No. 61 (revised April 2026) and city guidance as of October 2026, not tax advice for your situation. The Denver Revised Municipal Code, Sections 53-200 through 53-299, controls.

We set up Denver OPT in payroll and keep the monthly filings straight for small employers in Denver, CO and beyond: rkubeservices.com.