Federal, Sales, Self-Employment and Pennsylvania State Taxes Payable by Your LLC
Business taxes are a fact of life, and your PA LLC will need to pay a variety of taxes to both the federal and Pennsylvania governments. We’ll cover all the main taxes in Pennsylvania including self-employment, payroll, federal, Pennsylvania state tax and Pennsylvania sales tax.
If you want help with your taxes, Incfile provides a complete Business Tax Filing service.
How Your Pennsylvania LLC Will Be Taxed
The profits of a Pennsylvania LLC are not taxed at the business level, like those of C Corporations. Instead, tax for a Pennsylvania LLC works as follows:
- Pennsylvania LLC owners pay self-employment tax on business profits
- Pennsylvania LLC owners pay PA state tax on any profits, less state allowances or deductions
- All LLC owners pay federal income tax on any profits less federal allowances or deductions
- Some PA LLCs pay Pennsylvania 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 and 3 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 Pennsylvania personal tax returns and that’s where you will pay those taxes.
Pennsylvania Sales Tax, State Tax and Other Taxes for Your PA LLC
There are two main types of tax that you will pay to the Pennsylvania Department of Revenue: Pennsylvania state income tax and Pennsylvania state sales tax.
Pennsylvania State Tax on Your LLC Earnings
As a Pennsylvania business owner, you will need to pay PA state tax on any money you pay to yourself. These earnings flow through to your personal tax return, which is where you will pay Pennsylvania income tax. You will be taxed at the standard rates for Pennsylvania state taxes, and you will also get to apply regular allowances and deductions.
Any salaried employees will also need to pay personal Pennsylvania state taxes.
The Pennsylvania state tax rate is 3.07 percent.
Get more details on the Pennsylvania state tax here.
Your Pennsylvania LLC and PA 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 the PA Department of Revenue. Pennsylvania sales tax is collected at the point of purchase. Pennsylvania sales tax rates do vary depending on the region, county or city where you are located.
You will typically need to collect Pennsylvania sales tax on:
- Tangible, personal property and goods that you sell like furniture, cars, electronics, appliances, books, raw materials, etc.
- Certain services that your Pennsylvania business might provide
Most states do not levy sales tax on goods that are considered necessities, like food, medications, clothing or gas.
Get more details on the Pennsylvania sales tax here.
Pennsylvania Sales Tax Rates
Sales tax rates do vary between states, counties and cities. Typically, the state will set a base sales tax rate, then specific counties and cities may levy small additional sales tax amounts on top of that. Here are the sales tax rates for the major cities in Pennsylvania:
- Philadelphia: 8 percent
- Pittsburgh: 7 percent
- Allentown: 6 percent
- Lancaster: 6 percent
Federal Self-Employment and Income Taxes for Your Pennsylvania LLC
There are a couple different federal taxes that every LLC will need to pay, including Pennsylvania LLCs. These are self-employment tax and federal income tax, which are taxed as “pass-through” income via your tax return forms.
Pennsylvania LLC Federal Self-Employment Tax
All Pennsylvania 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 Pennsylvania 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 $140,000, you would pay self-employment tax of $21,420
Pay Less Self-Employment Tax by Treating Your Pennsylvania 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 Pennsylvania LLC self-employment tax through an S Corporation tax election.
Pennsylvania LLC Federal Income Tax
You must also pay regular federal income tax on any earnings you take out of your Pennsylvania 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 Pennsylvania 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.
Employer and Employee Taxes for Your Pennsylvania 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.
Pennsylvania LLC 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.
Pennsylvania LLC Federal and State Tax Withholding
You may also choose to withhold federal and Pennsylvania state 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 and Pennsylvania state income tax, your employees may need to file their own tax returns.
Pennsylvania LLC 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 Pennsylvania Department of Labor website.
Other Taxes and Duties for Your Pennsylvania LLC
Depending on the industry you are in, your Pennsylvania 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 Pennsylvania LLC
Most Pennsylvania 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
- Pennsylvania state tax
Most Pennsylvania LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.
FAQs on Pennsylvania LLC Business Taxes
Does Pennsylvania Have Sales Tax?
Yes. Pennsylvania does have a sales tax, which may vary among cities and counties. You can find more information above.
Does Pennsylvania Have a State Tax?
Yes. Pennsylvania does have a general state income tax. You can find more information above.
What Is the Sales Tax Rate in Pennsylvania?
We have listed common sales tax rates in Pennsylvania cities above.
Do I Need to Pay Estimated Taxes?
Yes. In most cases you must pay estimated taxes on your Pennsylvania tax, federal income tax and self-employment tax. Speak to your accountant for more information.