The Denver Occupational Privilege Tax (OPT), explained for employers

Of all the taxes that catch Front Range business owners off guard, Denver’s Occupational Privilege Tax — the OPT, sometimes called the “head tax” or “seat tax” — is the one we explain most often. It is small, it is easy to miss, and it is not part of your federal or state return, so a brand-new employer can run payroll for months without realizing they owe it. Then a letter shows up.

Here is the whole thing in plain English: what it is, who pays it, the amounts, and how to register before it becomes a problem.

What the OPT actually is

The OPT is a tax on the privilege of working in the City and County of Denver. It comes in two halves: a portion withheld from the employee, and a matching portion the business pays out of its own pocket. It applies per employee, per month, for anyone performing enough work inside Denver’s city limits — which is its own home-rule city, separate from the state.

The two halves, and the numbers

As of this writing, the monthly amounts are:

• Employee OPT — $5.75/month, withheld from each employee who earns at least $500 in a calendar month from work performed in Denver.
• Business OPT — $4.00/month, paid by the employer for each employee who is liable for the employee portion.

So for every qualifying employee, roughly $9.75 a month moves to the city — a few dollars you withhold, and a few the business covers. It is not a large number per person, but across a team it adds up, and the penalties for not filing dwarf the tax itself.

When do you owe it? The $500 test

The trigger is the $500-per-month threshold. If an employee earns $500 or more in a month for work performed in Denver, both halves of the OPT are due for that employee that month. Below $500, they are not liable that month. Because it is tested monthly, a part-time or seasonal worker can be liable in a busy month and not in a slow one.

There is also a rule for people who work multiple jobs: an employee only pays the employee OPT once, to their “primary” employer. If you hire someone who already pays it elsewhere, they can give you a form so you do not double-withhold — but you, as the secondary employer, may still owe the business portion.

Registering and filing

You register for an OPT account directly with Denver — not the state — generally within a couple of weeks of first becoming liable. From there you file and remit on a schedule the city assigns (monthly or quarterly), with returns due at the end of the month following the period. Miss filings and the city adds penalty and interest, and they do eventually notice.

The remote-work wrinkle

Because the OPT is about work performed in Denver, hybrid and remote arrangements complicate it. An employee who lives in Aurora but works in your Denver office is liable; an employee who works fully remote from Longmont may not be, even if your office is downtown. When your team is spread across the metro, tracking who actually performs work inside Denver each month is the part that trips people up — and it is exactly the kind of thing your payroll setup should handle automatically rather than by memory.

It is not just Denver

Denver gets the attention, but it is not the only Colorado city with an OPT. Aurora, Greenwood Village, Glendale, and Sheridan levy their own versions, each with its own rate and threshold. If you have employees working in more than one of these cities, you may owe in more than one place — so the answer is rarely “just Denver.”

Where owners trip up

• Not registering at all, because the OPT never came up when they set up federal and state payroll.
• Forgetting the business half — withholding the employee’s $5.75 but never paying the company’s $4.00.
• Applying it to remote employees who do not actually work in Denver, or missing the ones who do.
• Ignoring the other OPT cities when the team works in Aurora or Greenwood Village too.

The bottom line

The OPT is small, but it is the kind of small that compounds quietly into a penalty notice. The fix is boring and permanent: register once, wire it into your payroll process, and let it run. If you are not sure whether you are handling it correctly — or you just got a letter from the city — that is a quick thing for us to sort out with you.

This is general information for Front Range employers, not individual tax advice, and city rates and rules change. Confirm the current amounts with the City and County of Denver, or talk through your specific payroll setup with a CPA.