Colorado Amendment 87 Holds 51%: 8.4% Top Rate Looms

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Colorado Amendment 87 Holds 51%: 8.4% Top Rate Looms
Colorado Amendment 87 Holds 51%: 8.4% Top Rate Looms
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Colorado’s Amendment 87 held 51% of the vote on Friday, putting a 7.4% to 8.4% top income tax rate on track for 2027.

If you run a store out of Colorado through an LLC or S corp, this is your tax bill now, not someone else’s. Profit from a pass-through business lands on your personal return, so once Colorado taxable income clears $500,000, every extra dollar gets taxed at a rate up to 91% higher than today’s 4.4%. I covered this fight in October when Amendment 87 survived its court challenge. Here at Ecommerce Paradise the question was always the same: what does it do to a store owner’s take-home?

Below is what passed, how close it was, what the new brackets cost at different profit levels, and the handful of moves worth making before January 1. Most owners below the threshold actually get a small cut. The owners who should pay attention are the ones near $500,000 in profit and anyone planning to sell a store in the next couple of years.

Rethinking where your business and your mail live after this vote? Form your LLC with Northwest Registered Agent. If you spend part of the year outside the state you formed in, Northwest forwards your physical mail to you wherever you are. Start your LLC with Northwest →

Amendment 87 Leads 51% as Colorado’s 4.4% Flat Tax Ends in 2027

As of Friday morning, November 6, Amendment 87 had 51% support and a lead of roughly 71,000 votes, according to Colorado Politics and The Denver Gazette. Supporters declared victory on November 5. The Associated Press had not called the race at that point, per The Denver Post’s reporting, and The Gazette noted on November 9 that the result still was not officially certified.

Backers expect the outstanding ballots to widen the lead. Remaining votes were concentrated in Denver and Boulder counties, where the measure was winning about 2-to-1, according to the Denver Post report republished by CPA Practice Advisor.

The competing measure lost. Proposition 136, which would have capped individual and corporate income tax rates at the current 4.4%, had 47.08% yes in the election-night count and was trailing by 4.8 points two days later.

The new brackets

The state’s official ballot analysis spells out the schedule. Amendment 87 removes the constitutional requirement for a single flat rate and replaces 4.4% with six brackets, per the Colorado Blue Book analysis:

Taxable income up to $25,000: 3.7%. From $25,001 to $100,000: 4.2%. From $100,001 to $500,000: 4.4%, unchanged. From $500,001 to $750,000: 7.4%. From $750,001 to $1 million: 7.9%. Above $1 million: 8.4%.

Each rate applies only to the slice of income inside its bracket. The new schedule starts in tax year 2027. The brackets are not indexed for inflation, so more income drifts into the higher bands over time.

Who pays more and who pays less

The Blue Book puts the break-even at $510,834 of Colorado taxable income. Below that, the bill goes down. At or above it, the bill goes up. Its examples: a filer with $300,000 of taxable income pays $325 less, a filer at $625,000 pays $3,425 more, a filer at $875,000 pays $11,550 more, and a filer at $2 million pays $55,925 more.

By federal adjusted gross income, the state estimates 46,328 taxpayers earning $1 million or more will see an average increase of $26,085, totaling about $1.21 billion.

The money is projected at about $958.4 million in fiscal 2026-27 (a half-year of tax year 2027) and about $1.972 billion in the first full year, with a ceiling of $2.7 billion to allow for forecast error. It is earmarked for K-12 education, health care and early childhood programs, and it sits outside the TABOR revenue limit.

Businesses are inside the brackets too

This is the part store owners need to read twice. Most of Colorado’s 731,000 small businesses are pass-through entities, so their profit is taxed on the owners’ individual returns, according to Jared Walczak, senior fellow at the Tax Foundation. Of the state’s 53,640 filers with adjusted gross income above $500,000, 30,850 report partnership or S corporation income, per the same analysis. The measure also applies graduated rates to C corporations.

Walczak flagged a marriage penalty as well. The brackets are the same width for single and joint filers, so two spouses who each earn $500,000 face a $16,575 penalty compared with filing as two singles.

“This is a huge day for Colorado,” Chris deGruy Kennedy, president and CEO of the Bell Policy Center, said at the supporters’ celebration. The National Federation of Independent Business called the result “disappointing for Colorado’s small business owners and taxpayers” in a November 6 statement, according to The Gazette.

From TABOR’s Flat Tax to a Simple-Majority Vote

Colorado has taxed income at a single flat rate under its constitution for decades, and the Taxpayer’s Bill of Rights requires voter approval for rate increases. Constitutional amendments in Colorado normally need 55% to pass. Amendment 87 cleared a lower bar because it only removes constitutional language. The state title board ruled it needed a simple majority, a call that survived a challenge at the Colorado Supreme Court in late October.

The petition drive submitted just over 130,000 valid signatures against 124,632 required, per Colorado Politics. The fight split the state’s own Democrats. Outgoing Gov. Jared Polis called the measure “really the most dangerous for Colorado,” and Governor-elect Phil Weiser said a progressive income tax was “the wrong approach,” according to Denver7.

The same night in Washington

Colorado was not alone. Washington voters rejected Initiative 645, which would have repealed the state’s new 9.9% tax on income above $1 million, with nearly 58% voting no as of November 5, according to KUOW. I laid out the stakes for Washington sellers in my preview of the repeal vote.

Massachusetts is the precedent both sides point to. Its 4% surtax on income above $1 million, passed in 2022, brought in more than $3.1 billion in the first 10 months of its fiscal year against an original pitch of about $2 billion a year, according to CPA Practice Advisor’s May 2026 report on state revenue data.

The counterpoint

Opponents argue the revenue will not show up as advertised because high earners and businesses move. The Tax Foundation estimates that out-migration, reduced investment and tax avoidance eroded about 61% of the revenue California expected from its 2012 top-rate increase. Michael Smith, a director at NFIB, said higher taxes force small businesses to raise prices, cut hours or stop hiring. Leslie Oliver, vice president of the Denver Metro Chamber of Commerce, said Colorado’s top rate would now be higher than eight of its top 10 competitor states, including Texas and Arizona.

Supporters reject that. Aspen Mayor Rachael Richards told Bloomberg News that flight by wealthy residents is “not a real concern for me,” and the Massachusetts collections are their strongest evidence. Both sides have real data. Neither has Colorado data yet.

What 7.4% to 8.4% Brackets Do to a $750K Store Owner’s Bill

My read is that this hits a narrow slice of store owners hard and leaves most of them slightly better off. That is the honest answer, and it is not the one either campaign led with. I’m not a tax advisor, so treat the numbers below as a way to size the problem before you call your CPA.

Start with what a typical high-ticket store actually nets. A store doing $3 million a year in revenue at a 10% net margin throws off about $300,000 in profit. On that, Colorado’s bill drops by $325 in 2027. If you are building toward that level with a high-ticket dropshipping model, Amendment 87 is a rounding error for you right now.

The owner it actually hits

Now take a hypothetical owner with $750,000 of Colorado taxable income from an S corp, between salary and distributions. Under the 4.4% flat rate, the state bill is $33,000. Under the new brackets it works out to $40,175: $925 on the first $25,000, $3,150 on the next $75,000, $17,600 on the $400,000 band at 4.4%, and $18,500 on the $250,000 above $500,000 at 7.4%. That is $7,175 more per year.

At $1.2 million of taxable income, the same math produces $76,725 against $52,800 today, a hypothetical $23,925 increase. That is a part-time customer service rep, or a month of Google Shopping spend for a lot of the stores I see.

Stack the IRS changes on top. The 2027 federal brackets and Section 179 limit moved today, and the timing of big equipment or inventory deductions now matters at both levels of government.

The exit year is where it really bites

The Tax Foundation warns that high top rates hit one-time gains, like selling a business. That is the scenario I’d worry about most. A store sale can push one year’s income far above anything the business ever earned in profit.

Hypothetically, a Colorado owner who books $3 million of taxable gain in a single year would owe about $227,925 to the state under the new schedule, versus $132,000 under the flat rate. That is roughly $95,925 more, on one transaction. How the deal is structured changes how much of it is taxed and when, which is why I’d read up on asset sales versus equity sales before signing a letter of intent. Colorado may have specific subtractions that apply to your gain, so this is a conversation for your CPA, not a spreadsheet.

If a 2026 close is realistic, the timing question is real. If it is not, the next lever is a clean set of books, because buyers pay for verified profit and you want every dollar of the sale price to show up with documentation. My guide on how clean books add value to an exit covers what buyers check.

Moving your LLC is not the fix

Here is the mistake I expect to see. State income tax follows the owner’s residency and where the income is sourced, not the state on your LLC paperwork. A Colorado resident who re-forms the store as a Wyoming LLC still owes Colorado tax on that profit. Changing where you form the company is about privacy, fees and liability, and I explain that tradeoff in how I’d start an LLC for an ecommerce business today.

Actually changing residency is a different and much bigger decision. It means a new domicile, a new driver’s license, where you spend your days, and in many cases a new home. Bloomberg reported that plenty of wealthy Coloradans already own property in Wyoming, Utah and Arizona, which makes that move easier for them than for most store owners.

Owners who already live on the road have a cleaner setup. A business address that is not your house, like a virtual mailbox from AnytimeMailbox, keeps mail flowing while you sort out where home really is. My comparison of the best virtual business addresses for an LLC goes through the options.

Where the operator time goes

Tax planning at this level takes clean monthly numbers. You need to know where you are against the $500,000 line by October, not in April. Most owners near that line are also running suppliers, ads, customer calls and fulfillment issues at the same time, and the books slip first. If you want the store itself handled so you can spend that time on planning and growth, my team builds and launches stores through the turnkey done-for-you service.

Colorado just made entity structure and residency a bigger deal for store owners. Get the formation basics right first. See how to form your business →

Colorado Store Owners: Five Moves Before January 1, 2027

None of this changes your 2026 return. The window to plan is the next seven weeks. Here is what I’d do this week if I lived in Colorado and my store was anywhere near half a million in profit.

  1. Project your 2026 and 2027 Colorado taxable income now. Pull year-to-date profit from QuickBooks and estimate the full year. If 2027 lands above $510,834, you are in the group that pays more, and you want that number before your CPA’s year-end meeting.
  2. Ask your CPA whether to pull income into 2026. Billing timing, a December distribution or a pending sale might belong in the last year of the flat 4.4% rate. Getting monthly books closed fast makes that call possible, and Finaloop is built for ecommerce accrual accounting.
  3. Review your S corp salary split. Salary run through Gusto payroll and distributions are both Colorado income, so the split matters more for federal payroll tax than for this measure. Check it against the new 2027 Social Security wage base while you are in there.
  4. Max retirement contributions that cut taxable income. Pre-tax contributions lower the income that hits the 7.4% band. If you have not opened a Solo 401(k) yet, compare providers like Charles Schwab before year-end deadlines.
  5. If an exit is on the table, map the timeline this month. Brokers, due diligence and closing take months. Read what ecommerce buyers check during due diligence and decide with your CPA whether a 2026 close is realistic.

If you are earlier in the journey and nowhere near these brackets, the better use of your week is picking a product category with real margin. My free high-ticket niches list is the place to start.

Frequently Asked Questions

Did Amendment 87 officially pass?
Supporters declared victory on November 5 and the measure held 51% with a lead of about 71,000 votes on November 6. As of November 9 the result was not officially certified, so watch for certification before you act on anything irreversible.

When do the new Colorado rates start?
Tax year 2027, according to the state’s Blue Book analysis. Your 2026 return still uses the 4.4% flat rate.

Does it apply to LLC and S corp profits?
Yes. Pass-through profit is taxed on the owner’s personal return, so it falls inside the new brackets. My list of LLC mistakes I’d avoid covers the structure basics.

Will moving my LLC to Wyoming avoid the tax?
No. A Colorado resident owes Colorado income tax on the profit regardless of where the LLC is formed. Only a genuine change of residency changes that, and it comes with real requirements.

What if my store makes less than $500,000?
You likely pay slightly less. The Blue Book estimates a $325 cut for a filer with $300,000 of taxable income. If you are still building, my guide to launching a high-ticket store in 2026 is a better use of your time than tax planning.

What should I do with sale proceeds if I sell in 2027?
Plan the tax hit before closing, then plan the money. I wrote about what to do with the money in the first year after a sale.

Want to talk through tax moves, exits and store growth with other owners and me? Start the 7-day free trial of the community, then it is a paid membership. Join the Skool community →

I’ll keep watching Colorado for certification and for what the legislature does with the new brackets, since lawmakers can change the rates later. If you live there and you are near the line, get a meeting on your CPA’s calendar before Thanksgiving. Subscribe to the YouTube channel for daily breakdowns. More breaking news coming through the day.

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