Colorado's Method of Apportioning Income
Single-factor legislation passed in 2008 simplified Colorado's corporate income tax structure through a single factor apportionment, which assesses taxes on a company’s sales in Colorado only.
Prior to single factor, the taxpayer could decide each year whether to use the standard three-factor formula (wages, property, and sales) or a special two-factor (property and sales) formula.
Colorado has a liberal "water's edge" system of unitary taxation rather than a "worldwide" one. Specifically, foreign corporations, as well as "80/20" corporations (corporations with 80 percent of their property and payroll outside the U.S.) are not included in a Colorado income tax return. Corporations doing business in Colorado, as well as other states, must apportion to Colorado that part of their net income derived from sources within the state.