A Denver restaurant tax bill has several layers. On prepared food and drink, you collect 9.15% in combined sales tax: 5.15% for the City and County of Denver, 2.90% for Colorado, 1.00% for the Regional Transportation District, and 0.10% for the Scientific and Cultural Facilities District.1City and County of Denver. Denver Combined Tax Rates Effective 1-1-2025 On top of that, you owe Denver’s Occupational Privilege Tax on your workforce, business personal property tax on your equipment, and federal tip-reporting obligations that come with running a food service business.
How the 9.15% Breaks Down
Four separate authorities take a piece of every restaurant check in Denver.
- Denver’s 5.15% share funds the general fund plus voter-approved climate protection and homelessness programs. The base prepared food and drink rate in the Denver Revised Municipal Code is 4.00%, and additional voter-approved levies bring the city portion to 5.15%.2City and County of Denver. Tax Guide Topic 32 – Food and Drink
- Colorado’s statewide sales tax of 2.90% applies to all prepared food and drink sales.3Colorado Department of Revenue. Sales Tax Rate Changes
- RTD’s 1.00% funds bus and rail service across the metro area.
- SCFD’s 0.10% supports museums, theaters, and arts organizations across the metro area.4Scientific and Cultural Facilities District. About Us
All four apply everywhere in the city. A food truck in RiNo collects the same 9.15% as a white-tablecloth spot in LoDo. You act as a collection agent for all four jurisdictions and hold the money in trust until you remit it.
What’s Taxable and What’s Exempt
Denver taxes food and drink “regularly sold” by restaurants, cafes, lunch counters, caterers, snack bars, food trucks, and similar operations.2City and County of Denver. Tax Guide Topic 32 – Food and Drink Dine-in, takeout, and vending machine sales all count. Mandatory gratuities and service charges added to the bill are taxable too.
Grocery items sold for home consumption are exempt. Denver uses the federal Food Stamp Program definition: if you sell the item in the same form, condition, quantity, and packaging a grocery store would, it qualifies. Raw meat, bread, produce, dairy, cereal, and canned goods fit. Alcohol is always taxable regardless of setting.2City and County of Denver. Tax Guide Topic 32 – Food and Drink
Some items sit in between. Prepared salads, cold sandwiches, and salad bar items don’t get the home-consumption exemption unless the customer pays with food stamps or WIC benefits. If you sell both retail grocery items and prepared meals, track those categories separately in your POS so each sale gets the right rate.
Delivery Apps and the Retail Delivery Fee
When a customer orders through DoorDash, Uber Eats, or Grubhub, Colorado’s marketplace facilitator law puts the sales tax collection duty on the platform. The app collects and remits the 9.15%, not you. For orders placed on your own website or by phone, the obligation stays with you.
Colorado also charges a retail delivery fee on deliveries of tangible goods that include at least one taxable item. As of July 2025, the fee is $0.28 per delivery. Marketplace facilitators typically handle it on their orders. If you deliver yourself, you collect and remit the fee separately from sales tax.
Occupational Privilege Tax
Denver charges a flat monthly tax on everyone who works within city limits, and it has two halves.
Every employee who earns at least $500 in a calendar month owes $5.75 in Employee OPT, which you withhold from their paycheck and remit.5City and County of Denver. Tax Guide Topic 61 – Occupational Privilege Taxes You also pay $4.00 per month in Business OPT for each taxable employee. Owners, partners, and managers trigger the $4.00 Business OPT regardless of what they earn, as long as the business operates in Denver that month.6City and County of Denver. Business Tax FAQ
For a 25-person restaurant where everyone clears $500 a month, that’s $143.75 in withheld Employee OPT plus $100 in Business OPT, totaling $243.75. Add the owner’s $4.00 and you’re at $247.75. Modest next to sales tax, but the city audits it and applies the same 15% late-filing penalty that sales tax carries.
Federal Tip Reporting and the FICA Tip Credit
Restaurants with more than 10 employees on a typical business day must file IRS Form 8027 annually. The form reports gross food and beverage receipts alongside the tips employees reported, and the IRS uses it to check whether reported tips look reasonable against sales volume.7Internal Revenue Service. Instructions for Form 8027
The threshold turns on average employee hours, not headcount. Divide total employee hours worked in a month by the days you were open. If that average exceeds 10 for two consecutive months, you file Form 8027 for the rest of the calendar year. Most full-service Denver restaurants cross this line easily.
The FICA tip credit runs the other direction. If you pay the employer share of Social Security and Medicare taxes on employee tips, you can claim a federal credit on Form 8846 equal to 7.65% of the tips on which you paid FICA taxes, minus any tips needed to bring the employee’s base wage up to $7.25 per hour.8Internal Revenue Service. FICA Tip Credit for Employers Automatic gratuities and mandatory service charges don’t count as tips for this credit. Unused credits carry forward for up to 20 years.
Getting Your Denver Sales Tax License
You need a Denver Sales Tax License before you collect a dollar. The application covers sales tax, use tax, lodger’s tax, and Occupational Privilege Tax registration in one form. You’ll provide your Federal Employer Identification Number, legal entity name, any trade names, NAICS code, Colorado state sales tax number, and the physical address of your operation.9City and County of Denver. Application for Denver Sales, Use, Lodgers Tax License and Occupational Tax Registration
A few things trip people up. Each physical location needs its own application. The license is valid for two years, and you must verify your contact information with the Treasury Division by January 1 of each even-numbered year to keep it current. If you’re buying an existing restaurant, the application asks for the sale date and purchase price of furniture, fixtures, and equipment. Closing your business without notifying Treasury can leave you owing delinquency penalties on returns you didn’t know you had.
The tax license isn’t a general business license. You’ll likely need separate permits from Denver’s Excise and Licenses Department for things like a food establishment license or liquor license.
Filing, Payment, and Late Penalties
The Denver eBiz Tax Center handles returns, payments, and account history.10City and County of Denver. Business Tax Information Depending on volume, you file monthly, quarterly, or annually. Most restaurants with steady revenue file monthly. Returns and payments are due by the 20th of the month following the end of each period.
The portal accepts electronic checks, Visa, MasterCard, and Discover. Card payments carry a 2.5% service fee. Electronic checks avoid that fee, which matters when you’re remitting thousands each month.
Miss the deadline and Denver charges a 15% penalty on unpaid tax, with a minimum of $25 even when no tax is owed. Interest accrues at 1% per month from the due date.6City and County of Denver. Business Tax FAQ That $25 minimum surprises people. Zero taxable sales for a period and a late return still costs you $25.
Business Personal Property Tax
Your kitchen equipment, furniture, appliances, and POS systems are subject to Denver’s business personal property tax. If the total market value of your business personal property in Denver exceeds the city’s filing threshold, you submit a declaration listing all assets with their original acquisition dates and costs.11City and County of Denver. Business Personal Property The declaration is due April 15 each year and covers property owned as of January 1.
This one is easy to miss because the Assessor’s Office administers it, not the Treasury Division. A restaurant that recently spent six figures on a kitchen build-out will almost certainly clear the threshold. If you don’t file the declaration, the Assessor’s Office will estimate your property’s value for you, and that estimate rarely favors you.
Records and Audit Exposure
The IRS wants tax records kept for at least three years from the filing date, and employment tax records for at least four years after the tax is due or paid, whichever is later.12Internal Revenue Service. How Long Should I Keep Records Denver doesn’t publish a separate retention rule in its FAQ, but four years of sales records is a reasonable floor given the city’s audit practices.
Restaurants draw more audit attention than most businesses because of cash volume. The common triggers are mismatches between federal income tax returns and sales tax filings, unexplained swings in reported revenue, and inconsistent or late filing. Missing exemption certificates and disorganized sales records slow audits down once they start. If your POS can generate daily sales reports broken out by taxable and exempt categories, save those reports. They’re the fastest way to close out a discrepancy without a drawn-out examination.