I've fleshed my first otter and I'm going to tan it. I pulled it off the board and noticed that the upper lip is soft/thick/fleshy. I'm assuming that I need to do something about that. How do you go about fleshing that out?

Use a sharp skinning knife and shave it down carefully on the end of the beam.
You can also use poultry shears to trim it down.There is a lot of flesh around the whiskers and nose on an otter.

The other thing you have to take Into consideration Is when the otter Is on the board that nose area gets no air so It's hard to get dry. But once that hide comes off the board you will get lots of air moment In that area and that nose area will dry right up. Shove a wedge In to the mouth area and hang It up and it will dry out in a few days.

That's why when boarding otter you should put a wedge In from both the tail end and the head end. This allows more air flow for better drying and It also helps In getting that hide off the board. I also do this on my coyotes and most every other hide just gets the wedge shoved in from the mouth end. Makes no sense to shove In the skinny end of the wedge Into the tightest part of the hide.

I just checked. I pulled it off yesterday. The upper lip area does not feel as soft, so it is drying.

So the question is, Can I tan it as is or do I need to flesh it a bit? After tanning, I sand down the thicker parts. I would think I would do the same for the lip area to make it soft. But will the lip fully tan without doing something to it?

I doubt they go through every otter at the tannery and flesh out the lips. So I'm betting you will be OK once the lips are dry.

Next one you board just split the lip/nose area with your sharp skinning knife only takes a couple seconds,and you wont need to shave it down.
it will dry same time as the rest of the skin.