Q. Do I owe taxes in two states?
A. No.
Q. Do I file a tax return with CA?
A. No.
Q. Can anyone clarify this situation for me?
A. Yes. As a non-resident W-2 employee, who never physically worked in CA, you have no "CA source" income and do not need to pay CA income tax or even file a CA tax return. You do owe CO tax on all your wages from the CA based employer. Your employer did it right, withholding only CO tax.
The answer would be different if you sometimes actually worked in CA or you were self employed or a "contract employee" (no W-2).
