Business Taxes Payable by Your Alaska LLC
Business taxes are a fact of life, and your LLC will need to pay a variety of taxes to both the federal and Alaska governments. We’ll cover all the main taxes in Alaska, including self-employment, payroll, federal and sales tax..
If you want help with your taxes, Incfile provides a complete Business Tax Filing service.
How Your Alaska LLC Will Be Taxed
The profits of a Alaska LLC are not taxed at the business level like those of C Corporations. Instead, taxes for a Alaska LLC work as follows:
- Alaska LLC owners pay self-employment tax on business profits.
- All LLC owners pay federal income tax on any profits less federal allowances or deductions.
- Some LLCs pay Alaska sales tax on products.
- Employers pay payroll tax on any salaries they pay to employees.
- Employees pay federal, state and payroll tax on their earnings.
Items 1, 2 are taxed as “pass-through” income for any LLC owners, managers or members who receive profits from the business. Any profits are reported on federal and Alaska personal tax returns, and that’s where you will pay those taxes.
Alaska Taxes Payable to the Department of Revenue
Alaska does not charge a state income tax and does not have a statewide sales tax. However, many localities, towns and cities in Alaska do charge their own sales tax.
Your Alaska Sales Taxes
If you sell physical products or certain types of services, you may need to collect sales tax (also known as sales and use tax) and then pay it to your local or regional authority. Alaska sales tax is collected at the point of purchase. Alaska sales tax rates do vary depending on the region, county or city where you are located, although Alaska does not have a statewide sales tax rate.
You will typically need to collect Alaska sales tax on:
- Tangible, personal property and goods that you sell like furniture, cars, electronics, appliances, books, raw materials, etc.
- Certain services that your Alaska business might provide
Most states do not levy sales tax on goods that are considered necessities, like food, medications, clothing or gas.
Get details on the Alaska sales tax here.
Federal Taxes for Your Alaska LLC
There are a couple of different federal taxes that every LLC will need to pay, including Alaska LLCs. These are self-employment tax and federal income tax, which are taxed as “pass-through” income via your tax return forms.
Federal Self-Employment Tax
All Alaska LLC business members or managers who take profits out of the LLC will need to pay self-employment tax. This tax is also known as FICA, Social Security or Medicare tax. It applies to all the earnings you withdraw from your Alaska business. The current self-employment tax rate is 15.3 percent.
You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe. Here are some examples of how much self-employment tax you may need to pay, depending on your earnings:
- On profits of $40,000, you would pay self-employment tax of $6,120.
- On profits of $70,000, you would pay self-employment tax of $10,710.
- On profits of $100,000, you would pay self-employment tax of $15,300.
- On profits of $160,000, you would pay self-employment tax of $24,480.
Pay Less Self-Employment Tax by Treating Your Alaska LLC as an S Corporation
The Internal Revenue Service allows LLCs to ask to be treated as an S Corporation for tax purposes. This can help you reduce the amount of self-employment tax that you pay by declaring some of your income as salary and other income as distributions or withdrawals.
You can do this by making an “S Corporation Tax Election” with the IRS using a form known as Form 2553. We can file your Form 2553 with the IRS on your behalf.
Incfile Form 2553 S Corporation Tax Election for an LLC service
Speak to your accountant for more information on reducing your Alaska LLC self-employment tax through an S Corporation tax election.
Federal Income Tax
You must also pay regular federal income tax on any earnings you take out of your Alaska LLC. The amount of income tax you pay depends on your earnings, current income tax brackets, deductions and how you file.
You only pay federal income tax on your LLC profits that you take out of the business, less certain deductions and allowances. This includes your tax-free amount, plus LLC business expenses and other deductions for areas such as healthcare and some retirement plans. Speak to your accountant for more information.
Employee and Employer Taxes for Your Alaska LLC
If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your own unique situation.
Employer Payroll Tax Withholding
All employers must collect and withhold payroll tax from their employees when they receive their salaries. You would normally withhold 7.65 percent of the taxable salary that you pay to your employees.
Employer Federal Tax Withholding
You may also choose to withhold federal income tax on the wages you pay to employees. Speak to your accountant for more information.
Employees May Need to File Tax Returns
Regardless of whether you withhold federal tax, your employees may need to file their own tax returns.
Employee Insurance and Other Requirements
You may also need to pay insurance for any employees, like employee compensation insurance or unemployment tax. There will also be other requirements you have for employees.
Get more requirements from the Alaska Department of Labor and Workforce Development website.
Other Taxes and Duties for Your Alaska LLC
Depending on the industry you are in, your Alaska LLC may be liable for certain other taxes and duties. For example, if you sell gasoline you may need to pay a tax on any fuel you sell. Likewise, if you import or export goods you may need to pay certain duties. Speak to your accountant about any other taxes you may need to withhold or pay.
Estimated Taxes for Your Alaska LLC
Most Alaska LLCs will need to pay estimated taxes throughout the year, depending on the amount of income and profit you expect to make. The most common types of estimated tax are:
- Federal income tax
- Federal self-employment tax
Most Alaska LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.
FAQs on Alaska LLC Business Taxes
Does Alaska Have Sales Tax?
Alaska does not have a statewide sales tax, although many towns, cities, regions and localities have their own sales tax.
Does Alaska Have a State Tax?
No. Alaska does not have a general state income tax.
Do I Need to Pay Estimated Taxes?
Yes. In most cases you must pay estimated taxes on any Alaska tax, federal income tax and self-employment tax. Speak to your accountant for more information.