Key figures
Colorado payables
2026, with sources
1099s and use tax
Colorado wants only the 1099s that show Colorado income tax withheld, filed with the Department by January 31, the same day as the federal copy. A startup that pays contractors without withholding has no Colorado 1099 filing, and there is no required withholding on payments to nonresident contractors.
Use tax is due on taxable purchases where no sales tax was charged: equipment, furniture and downloaded software, at 2.9% plus any local rate. The state doesn’t tax SaaS, but the home-rule city you’re in might, and its use tax then applies to subscriptions from vendors that don’t collect it.
Classification
Colorado’s unemployment law presumes a paid worker is an employee unless the company shows the worker is free from control and direction and customarily engaged in an independent trade, occupation, profession or business. CDLE audits classification for UI and FAMLI premiums together, so a misclassified contractor costs both.
The federal baseline
This page covers what Colorado adds. The federal rules underneath it apply here too.
Common questions
Do we owe use tax on software subscriptions?
Not to the state. Colorado doesn’t tax SaaS, so a SaaS subscription bought from out of state brings no state use tax. Home-rule cities can be different: Denver, among others, taxes some SaaS, and a Denver business owes Denver use tax when a vendor didn’t charge Denver sales tax.
Which contractor test does Colorado use?
For unemployment insurance, CDLE treats a worker as an employee unless the worker is free from control and direction and is customarily engaged in an independent trade or business. A written agreement helps, but the facts decide.
Payables next door
- WYWyoming payablesWyoming has no state 1099 filing; use tax applies to downloaded and boxed prewritten software but not to SaaS, PaaS or IaaS, which Wyoming doesn’t tax.
- NENebraska payablesNebraska takes 1099s only when Nebraska tax was withheld. Use tax reaches downloaded software and hardware, not access-only SaaS.
- KSKansas payablesKansas wants a copy of every 1099 by January 31, through CF/SF unless Kansas tax was withheld. Use tax reaches hardware and installed software, not most SaaS.
- OKOklahoma payablesOklahoma classifies workers with a common-law control test, and use tax reaches tangible goods bought without Oklahoma tax rather than most SaaS.
- NMNew Mexico payablesVendors pass gross receipts tax through on services, and purchases without it owe compensating tax. 1099s with New Mexico withholding go to TRD.
- AZArizona payablesArizona collects 1099s that show Arizona withholding with the A1-R by Jan 31, offers a statutory contractor declaration, and charges use tax on untaxed SaaS.
- UTUtah payablesUtah wants 1099s that show Utah withholding by Jan 31, has no contractor withholding, and charges use tax on software, SaaS included, used in Utah.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- Sales taxSales tax nexus for startups: when you owe tax in a stateSince Wayfair, selling into a state can create a sales tax obligation. How economic nexus works, why SaaS is taxable in some states and when to register.
More of the Colorado guide
- AccountingAccounting and state tax in ColoradoCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in ColoradoSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayrollPayroll taxes and employer rules in ColoradoWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in ColoradoRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in ColoradoCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.