Idaho LLC Taxes

Understanding your tax responsibilities is key to successfully managing an LLC in Idaho. This guide is tailored to help you, as an LLC owner, navigate the intricate tax requirements at various levels. 

This guide walks you through what you need to know about Idaho LLC Taxes at the local, state, and federal levels, ensuring you're well-equipped to keep your business compliant and financially sound.

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

How Is an LLC Taxed in Idaho?

Taxation in Idaho isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.

While LLCs typically benefit from pass-through taxation by default, they can elect to be taxed as one of the following:

• C Corporations: The LLC is treated as a separate entity to its owners, paying corporate income tax rates on its total profit while the owners also pay state and federal income taxes on any distributions they take.
• S Corporations: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay FICA or self-employment taxes on them.

The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Idaho to help you ensure your LLC navigates them effectively.

Idaho Local Taxes

The local laws and tax regulations differ greatly between different localities in Idaho, where there are currently a number of unique taxes in place at a local level.

Below is a list of tax types that your city or county may impose:

Sales and Use Taxes

If your LLC is involved in selling goods or services within Idaho or to Idaho-based customers, you’ll need to collect sales tax and remit it to the state and/or local government agency:

• Local Sales Tax: This is determined by the location of your LLC’s place of business. If your business is physically located in a particular city or county, the local sales tax rate of that area applies to your sales.
• Local Use Tax: The use tax is determined by where the items you sell are first stored or used by the customer. For example, if you sell a product online and it is shipped to an Idaho customer, the use tax rate would be based on the customer's location.

Local jurisdictions, particularly resort cities, are authorized to levy sales taxes of up to 3%; this is in addition to any state sales taxes you may need to pay, meaning that your total sales and use tax rate can reach up to 9%, depending on your area. 

Special Situations

Keep in mind that certain situations, such as location, can have an effect on how your sales and use tax rate is applied to your LLC:

• Drop Shipping: The sales tax rate for drop-shipped items may depend on the customer's delivery location.
• Temporary Vendor Operations: If your LLC sells goods at temporary events in different localities, like fairs or markets, the local sales tax rate of the event’s location applies.
• Multi-Location Sales: Businesses with multiple locations must apply the sales tax rate specific to each location's jurisdiction.
• Digital Goods Sales: Sales of digital products such as ebooks or software might be taxed differently, depending on the buyer's location.

Exemptions and Discounts

In Idaho, certain transactions are exempt from both sales and use taxes, which can have a significant impact on your LLC's financial management:

• Resale Exemptions: Items purchased for resale are exempt from sales and use tax at the point of purchase, as they will be taxed when sold to the final consumer.
• Agricultural and Nonprofit Exemptions: Specific exemptions apply to agricultural operations and purchases by non-profit organizations, exempting them from sales and use tax under certain conditions.
• Impact of Discounts: Manufacturer’s rebates and retailer’s coupons reduce the taxable purchase price, consequently affecting the amount of sales and use tax owed.

Property Tax

In Idaho, property taxes are not administered at the state level but are managed locally by each county. Here’s how it works for LLCs owning property:

• Assessment: Each county in Idaho has an assessor's office responsible for appraising the value of properties, including business properties owned by LLCs.
• Tax Rates: The local property tax rate in Idaho varies by county and is set by local taxing authorities, such as school districts, cities, and other local entities. These rates are applied to the appraised property value to calculate the tax bill.

For detailed information specific to property tax in your Idaho locality, we recommend reaching out to the appropriate county offices. The County Assessor's Office is your go-to for queries about property valuation, understanding exemptions, or learning about appraisal methods.

Note: For detailed guidelines on your LLC’s local taxes, see the Idaho State Tax Commission City Sales Tax page.

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.

Idaho State Taxes

In Idaho, limited liability companies (LLCs) must navigate a variety of state taxes. Below is a concise summary of the primary state taxes applicable to LLCs:

• Business Franchise Tax: LLCs in Idaho opting to be taxed as corporations are subject to the state's business privilege tax of 6%. This rate applies to the taxable income of the business and will need to be paid instead of local income taxes. 
• Idaho State Income Tax: If your LLC is taxed as a pass-through entity, you will need to pay state income taxes in addition to the federal income tax rate of the IRS. The current state income tax rate as of 2024 is between 1 and 6%.
• State Sales and Use Tax: Idaho's state sales and use tax, set at a 6% rate, impacts numerous transactions. If you're selling goods like electronics, clothing, or furniture or providing services such as consulting or software development in Idaho, you'll need to account for this tax.
• Travel and Convention Tax: If your LLC operates within the hospitality sector in Idaho, such as managing hotels, motels, or vacation rentals, it's important to be aware of the Travel and Convention Tax. This tax, currently set at a rate of 2%, is levied on occupants of short-term lodgings and is charged in addition to the state's 6% sales tax. Keep in mind that it does not apply to guests who stay for more than 30 continuous days in the same facility.
• E911 Prepaid Wireless Fee: LLCs selling prepaid wireless telecommunications services are required to collect a 2.5% E911 Prepaid Wireless fee on the sales price of the service. This fee supports consolidated emergency communications systems and is applicable to various forms of prepaid wireless services.
• Permanent Building Fund (PBF) Tax: The Permanent Building Fund (PBF) Tax in Idaho is a fixed $10 charge applicable to various business entities, including C corporations, S corporations (charged per shareholder for Idaho income tax), partnerships ( charged per partner), and estates and trusts ( charged per beneficiary responsible for Idaho income tax).

Note: For more detailed information, visit the Idaho State Tax Commission’s website.

Federal Taxes

Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below, we’ve explored some of the main types your LLC may be required to pay for federal tax purposes:

Income Tax

By default, the IRS will not treat single and multi-member LLCs as separate entities from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your individual federal income tax return and pay federal income tax on them at the personal rate of your tax bracket.

Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these taxes are levied in different ways.

Self-Employment Tax

In addition to income tax, members of single- and multi-member LLCs will need to pay self-employment tax on the share of the business’s profits that they report on their personal tax return at the end of the year.

This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.

Employment Tax

If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.

Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.

Excise Tax

If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.

Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.

How to File LLC Taxes in Idaho

Below, we’ve outlined the general process an LLC in Idaho will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in. 

Step 1: Gather Your Documentation

To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:

• You and your partner’s Social Security number, date of birth, and residential address
• The previous year’s tax returns
• Your LLC’s Employer Identification Number (EIN)

Then, you’ll need to gather all documentation related to your business’s income, such as:

• Invoices you’ve issued
• Sales transaction logs
• Electronic payment reports from services like PayPal or Stripe

Lastly, assemble all records pertaining to your business expenses, which should cover:

• Lease receipts for your business premises
• Bills for utilities
• Records of office supplies purchases
• Documentation of business-related travel
• Payroll records for employees

Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return. 

Step 2: Find The Right Tax Forms

Once you've gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:

• Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
• Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
• C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it's a weekend or holiday.
• S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline for filing taxes using 1120-S is March 15 or the following business day. 

Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.

With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.

Step 3: File Your Taxes

The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:

• Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
• State Tax Returns: Submit your Idaho state tax returns online using the modernized E-File system (MeF) offered by the Idaho State Tax Commission and the IRS.
• Local Tax Returns:  The procedures for filing local taxes vary depending on the type of tax, so make sure to consult with your local tax authority for specific guidance and detailed information. 

Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form. 

For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings. 

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

Keep Your Idaho LLC Compliant

While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant. 

Idaho LLC Annual Report

To ensure your Idaho LLC remains compliant, it's crucial to file an annual report with the Secretary of State. This report should be submitted each year by the end of your LLC's anniversary month. If the due date falls on a weekend or a public holiday, the deadline extends to the next business day. 

Keep in mind that while Idaho doesn't impose late fees for delayed annual report submissions, failure to file within 60 days of the due date can lead to the administrative dissolution of your business.

Licensure and Tax Requirements

In Idaho, almost all businesses are required to obtain various licenses and permits at the local, state, and federal levels. Below, we’ve broken down three of the most common types your LLC may need:

• Sales Tax Permits: If your business involves selling tangible goods or certain services, obtaining a sales tax permit is essential. This can be acquired through the Idaho State Tax Commission, allowing you to legally collect and remit sales tax.
• Professional Licenses: If your LLC operates in a regulated field like legal services, healthcare, or engineering in Idaho, securing the relevant professional licenses is a must. Each industry has its specific licensing board within the state that oversees and issues these licenses, ensuring that businesses meet the necessary professional standards and regulations.
• Health Department Permits: Businesses that impact public health, like food service establishments or facilities with public pools, must secure appropriate permits from the Idaho Department of Health and Welfare or local health departments.

Note: To obtain a comprehensive list of the statewide licenses and permits that your LLC may require, check out the Idaho Business Wizard provided by Idaho's Business Permit Office.

Idaho LLC Taxes FAQs