Business Taxes Payable by Your Utah LLC
Business taxes are a fact of life, and your LLC will need to pay a variety of taxes to both the federal and Utah governments. We’ll cover all the main taxes in Utah, including self-employment, payroll, federal, Utah state tax and Utah sales tax.
If you want help with your taxes, Incfile provides a complete Business Tax Filing service.
How Your Utah LLC Will Be Taxed
The profits of a Utah LLC are not taxed at the business level like those of C Corporations. Instead, taxes for a LLC work as follows:
- Utah LLC owners pay self-employment tax on business profits.
- Utah LLC owners pay UT 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 LLCs pay Utah 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 Utah personal tax returns, and that’s where you will pay those taxes.
Utah State Tax on Your LLC Earnings
As a Utah business owner, you will need to pay state tax on any money you pay to yourself. These earnings flow through to your personal tax return, which is where you will pay income tax. You will be taxed at the standard rates for Utah state taxes, and you will also get to apply regular allowances and deductions.
Any salaried employees will also need to pay personal state taxes.
The Utah state tax rate is 4.95 percent.
Get details on the Utah state tax here.
Utah Sales Taxes for LLCs
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 UT Commission of Revenue. Utah sales tax is collected at the point of purchase. Sales tax rates do vary depending on the region, county or city where you are located.
You will typically need to collect Utah sales tax on:
- Tangible, personal property and goods that you sell like furniture, cars, electronics, appliances, books, raw materials, etc.
Certain services that your 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 Utah sales tax here.
There are a couple of different federal taxes that every LLC will need to pay, including Utah 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 Utah 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 Utah 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 $30,000, you would pay self-employment tax of $4,590.
- On profits of $60,000, you would pay self-employment tax of $9,180.
- 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 Utah 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 Utah 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 Utah 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.
Employer and Employee Taxes
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.
Federal and State Tax Withholding
You may also choose to withhold federal and Utah 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 Utah state income 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 Utah Commission of Labor website.
Other Taxes and Duties for Your Utah LLC
Depending on the industry you are in, your Utah 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 Utah LLC
Most Utah 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
- Utah state tax
Most Utah LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.
FAQs on Utah LLC Business Taxes
Does Utah Have Sales Tax?
Yes. Utah does have a sales tax, which may vary among cities and counties.
Does Utah Have a State Tax?
Yes. Utah does have a general state income tax. You can find more information above.
Do I Need to Pay Estimated Taxes?
Yes. In most cases, you must pay estimated taxes on your Utah tax, federal income tax and self-employment tax. Speak to your accountant for more information.