A restaurant in Denver collects a combined 9.15% sales tax on prepared food and drink, and that rate is only the start of the Denver restaurant tax picture: owners also owe the city’s Occupational Privilege Tax, an annual business personal property declaration, and federal tip-reporting obligations to the IRS.1City and County of Denver. Denver Combined Tax Rates Effective 1-1-2025 The 9.15% rate on food and drink is higher than the 8.00% applied to most other retail goods in the city.
How the 9.15% Rate Breaks Down
Four separate taxing authorities make up the number on a Denver restaurant receipt:
- Denver: 5.15%. The city’s base prepared food and drink rate under the Denver Revised Municipal Code is 4.00%, with voter-approved levies for programs like climate protection and homelessness bringing the Denver portion to 5.15%.2City and County of Denver. Tax Guide Topic 32 – Food and Drink
- State of Colorado: 2.90%.3Colorado Department of Revenue. Sales Tax Rate Changes
- Regional Transportation District: 1.00%.1City and County of Denver. Denver Combined Tax Rates Effective 1-1-2025
- Scientific and Cultural Facilities District: 0.10%.4Scientific and Cultural Facilities District. About Us
All four layers apply regardless of neighborhood or format. A food truck in RiNo and a tablecloth restaurant in LoDo collect the same 9.15%. The money isn’t yours while you hold it. You act as a collection agent and hold the tax in trust until it’s remitted.
What Counts as Taxable Prepared Food
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 are all included. Mandatory gratuities and service charges added to a bill are taxable at the same rate.
Grocery items sold for home consumption are exempt. Denver follows the federal Food Stamp Program definition: if an item is sold in the same form, condition, quantity, and packaging as a grocery store would sell it, it qualifies as exempt food for home use. Raw meat, bread, produce, dairy, cereal, and canned staples fit that definition. Alcoholic beverages are always taxable regardless of where they’re sold.2City and County of Denver. Tax Guide Topic 32 – Food and Drink
Some items sit in a gray zone. Prepared salads, cold sandwiches, and salad bar items do not qualify for the home-consumption exemption unless they’re purchased with food stamps or WIC benefits. If your operation sells both retail grocery items and prepared meals, track those categories separately so you charge the right rate on each sale.
Delivery Apps and the Retail Delivery Fee
When a customer orders through DoorDash, Uber Eats, or Grubhub, Colorado’s marketplace facilitator law shifts the sales tax collection obligation to the platform. The delivery app collects and remits the 9.15% on those orders. For orders placed directly through your own website or by phone, you remain responsible for collecting and remitting the full tax yourself.
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. If a marketplace facilitator handles the order, it collects and remits the fee. If you handle your own delivery orders, you collect and remit it separately from your sales tax.
Denver’s Occupational Privilege Tax
Denver charges a flat monthly tax called the Occupational Privilege Tax on everyone who works within city limits, and restaurant owners handle both halves of it.
Every employee who earns at least $500 in a calendar month owes $5.75 in Employee OPT, withheld from the paycheck and remitted by the employer.5City and County of Denver. Tax Guide Topic 61 – Occupational Privilege Taxes On top of that, the employer pays $4.00 per month in Business OPT for each taxable employee. Owners, partners, and managers trigger the $4.00 Business OPT regardless of how much they earn, as long as the business operates in Denver that month.6City and County of Denver. Business Tax FAQ
It’s a modest line item compared to sales tax, but the city audits it carefully and applies the same 15% late-filing penalty that applies to sales tax.
Federal Tip Reporting and the FICA Tip Credit
Restaurants with more than 10 employees on a typical business day must file IRS Form 8027 each year. The form reports the establishment’s total gross receipts from food and beverages alongside the tips employees reported, and the IRS uses it to check whether reported tips look reasonable given sales volume.7Internal Revenue Service. Instructions for Form 8027
The threshold is based on average employee hours, not raw headcount. Divide total employee hours worked during the month by the number of days you were open. If that average exceeds 10 for two consecutive months, you must file Form 8027 for the rest of the calendar year. Most full-service Denver restaurants cross this threshold easily.
On the upside, owners who pay the employer share of Social Security and Medicare taxes on employee tips can claim a federal tax credit on Form 8846. The credit equals 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 do not count as tips for this credit. Unused credits carry forward for up to 20 years.
Getting a Denver Sales Tax License
You need a Denver Sales Tax License before collecting any tax. One application form covers sales tax, use tax, lodger’s tax, and Occupational Privilege Tax registration. You’ll need your Federal Employer Identification Number, legal entity name, any trade names, NAICS code, Colorado state sales tax number, and the physical address where you’ll operate.9City and County of Denver. Application for Denver Sales, Use, Lodgers Tax License and Occupational Tax Registration
A separate application is required for each physical location. 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 with delinquency penalties on returns you didn’t realize you still owed.
A tax license is not a general business license. You’ll likely need additional permits from Denver’s Excise and Licenses Department, including a food establishment license and, if applicable, a liquor license.
Filing, Deadlines, and Penalties
The Denver eBiz Tax Center is the city’s online portal for filing returns, making payments, and reviewing your account.10City and County of Denver. Business Tax Information Depending on your sales volume, you’ll 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 filing period.
The portal accepts electronic checks, Visa, MasterCard, and Discover. Credit and debit card payments carry a 2.5% service fee. Electronic checks have no fee, which matters when you’re remitting thousands each month.10City and County of Denver. Business Tax Information
Miss the deadline and Denver charges a 15% penalty on the unpaid tax, with a minimum penalty of $25 even if no tax is due. Interest accrues at 1% per month from the due date until payment.6City and County of Denver. Business Tax FAQ That $25 minimum catches people off guard. If you had zero taxable sales for a period and file the return late, you still owe $25.
Business Personal Property Tax
Restaurant equipment, furniture, kitchen appliances, and point-of-sale 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 must submit a declaration listing all assets along with their original acquisition dates and costs.11City and County of Denver. Business Personal Property The declaration is due by April 15 each year and covers property owned as of January 1.
This tax is easy to overlook because the Assessor’s Office administers it, not the Treasury Division that handles your sales tax. A restaurant that recently spent six figures outfitting a kitchen will almost certainly exceed the threshold. Failing to file the declaration can result in the city estimating your property’s value for you, usually not in your favor.
Audits and Record Keeping
Restaurants draw more audit attention than most businesses because of the volume of cash transactions. The most common triggers are mismatches between federal income tax returns and sales tax filings, sudden unexplained changes in reported revenue, and late or inconsistent filing patterns.
The IRS requires businesses to keep tax records for at least three years from the filing date, but employment tax records must be retained for at least four years after the tax is due or paid, whichever is later.12Internal Revenue Service. How Long Should I Keep Records If you underreport income by more than 25% of gross receipts, the IRS has six years to pursue the return. Denver doesn’t publish its own retention requirement in its FAQ, but keeping at least four years of sales records is prudent given the city’s audit practices.
Missing exemption certificates and disorganized sales records make audits worse once they start. If your POS system can produce daily sales reports broken down by taxable and exempt categories, keep those reports. They’re the fastest way to resolve a discrepancy without a prolonged examination.