Utah LLC Taxes
If you're thinking of setting up a limited liability company (LLC) in Utah, it's essential to understand the state's tax requirements. Our Utah LLC Taxes guide offers an in-depth analysis of the tax obligations at the local, state, and federal levels, as well as how to navigate these obligations effectively as an LLC.
Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.
How Is an LLC Taxed in Utah?
Taxation in Utah isn’t applied in the same way to all limited liability companies – 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 personal 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 self-employment tax or FICA tax on them.
The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Utah to help you ensure your LLC navigates them effectively.
Utah Local Taxes
We've outlined the most pertinent local taxes that may affect your Utah LLC below.
Local Option Sales Tax
Municipalities In Utah are allowed to apply a standard 1% Local Option Sales Tax in addition to the state's sales and use tax rate. Cities or towns have the authority to further increase this by an additional 1%, which, by law, must exempt grocery food sales. Counties also have the option to levy an extra 0.25%.
Additionally, several other local taxes may come into play, depending on the location and nature of the goods:
- Resort Communities: Cities or towns can impose up to an additional 1.6% in resort areas.
- Rural Health Care: Counties, cities, or towns can levy up to 1% extra sales tax in rural healthcare areas.
- Public Transit: Up to 0.3% additional tax may be applied by counties, cities, or towns for public transit funding.
- County Option Transportation: Counties have the option to add up to 0.25% for transportation purposes.
These variations in local taxes mean that the total sales tax rate in certain jurisdictions could significantly increase, potentially reaching up to 8.85% for some goods and in specific locations.
Note: To determine the specific combined sales tax rate for your area in Utah, refer to Pub 25: Sales and Use Tax General Information.
LLCs owning real estate or tangible property in Utah are going to be faced with property taxes. These taxes are determined at the county level, with the county assessor setting the property's assessed value. Tax rates, however, vary depending on the county, city, or special district in which the property is located and are calculated as a percentage of the property's assessed value, collected on an annual basis.
Businesses must also consider property taxes on tangible personal property, such as equipment and furniture. There are typically exemptions available, particularly for smaller businesses with limited personal property.
Note: For more information, visit the Utah League of Cities and Towns website.
For LLCs operating restaurants in Utah, there's an additional tax known as the Restaurant Tax. Counties in Utah have the authority to levy this tax at a rate of up to 1% on sales. This tax applies to food, food ingredients, and prepared food sold by restaurants and is reported on the Sales Prepared Food Return form.
Transient Room Tax
For LLCs operating in Utah's lodging sector, the Local Transient Room Tax targets short-term lodging facilities like hotels, motels, inns, tourist homes, trailer courts, campgrounds, and similar accommodations.
Here's a closer look at how this tax impacts such businesses:
- County Tax: Counties across Utah can impose a transient room tax on temporary lodging, up to a maximum rate of 4.25%.
- City and Town Tax: In addition to county taxes, cities and towns in Utah are authorized to levy a tax of up to 1% on temporary lodging.
- Additional Tax: Some cities and towns that meet specific criteria have the authority to impose an additional transient room tax of up to 0.5% on temporary lodging.
- Salt Lake County Tourism Tax: Salt Lake County imposes a separate tourism tax of 0.5% on temporary lodging.
Note: Keep in mind that these local taxes are in addition to Utah's statewide transient room tax and do not apply to non-lodging spaces such as convention halls or meeting rooms. Additionally, lodging services provided for stays of 30 consecutive days or longer are exempt from these transient room taxes.
Short-Term Leasing Tax
For LLCs in Utah involved in short-term leasing and rentals, specific tax considerations apply to motor vehicles and recreational vehicles. Here's a detailed look at the tax structure:
- Motor Vehicle Short-term Leases and Rentals: Counties in Utah can impose a tax of up to 7% on short-term leases and rentals of motor vehicles for periods less than 30 days. Exceptions include vehicles temporarily replacing another under repair or insurance agreement, vehicles registered for a gross laden weight of over 12,001 pounds, and moving vans used for personal household goods.
- Off-Highway and Recreational Vehicles: Counties may tax short-term rentals of off-highway and recreational vehicles at a rate of up to 7%. This category includes snowmobiles, motorcycles, all-terrain vehicles, travel trailers, camping trailers, and fifth-wheel trailers.
Recommended Service: Schedule a free consultation with 1-800Accountant to ensure your business remains legally compliant.
Utah State Taxes
Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level taxes for LLCs in Utah.
Corporation Franchise and Income Tax
Utah’s corporation franchise and income tax rate is 4.85% for every business taxed as a C corporation in the state, domestic and foreign.
All such businesses are required to file a corporate franchise tax return using Form TC-20. Along with this filing, each corporation is subject to a minimum privilege tax of $100, which is mandatory regardless of the extent of their business activities within Utah.
Note: LLCs taxed as an S corporation are exempt from the minimum privilege tax.
Individual Income Taxes
Utah applies a single tax rate of 4.65% on all taxable income, regardless of income level. This flat tax rate is particularly relevant for LLCs as pass-through taxation applies to them by default — where the income is taxed at the individual level rather than at the corporate level.
Note: LLC members can use the Utah state income tax calculator to estimate their tax obligations under this flat rate system. While this tool provides a useful estimate, it's advisable to seek professional guidance for precise tax calculations.
Sales and Use Taxes
Sales and use taxes in Utah are set at a rate of 4.85% and apply to transactions involving the sale or use of tangible personal property and certain services. These taxes are transaction-based, meaning they are applied to the exchange rather than the goods or services themselves. It's the responsibility of sellers to collect sales tax and remit it to the Tax Commission.
Use tax is relevant when sales tax isn't collected at the point of sale, such as in transactions with out-of-state vendors or when business inventory is used for personal purposes. Both taxes adhere to the same rate and have similar exemptions, which include certain types of grocery food, prescriptions, and medical equipment.
Note: For detailed information on sales and use taxes, related publications from the Utah State Commission can be found on their website.
In Utah, LLCs that are licensed insurance companies must file an annual Insurance Premium Tax Return. This tax is specific to the insurance industry and is separate from general Utah income tax at a corporate level, which these companies are exempt from.
The insurance premium tax rate is not a fixed percentage but varies based on different factors and the specific insurance products offered. The tax return is due annually by March 31, and there are no extensions provided by Utah law.
Note: For more information on paying the insurance premium tax, see TC-49: Insurance Premium Tax Return Instructions.
Motor Vehicle Rental State Tax
For LLCs in Utah involved in the motor vehicle rental business, the state imposes a 2.5% tax on short-term leases and rentals of motor vehicles (for periods less than 30 days).
However, there are notable exceptions to this tax. It does not apply if the vehicle is temporarily replacing another vehicle under a repair or insurance agreement if it's registered for a gross laden weight of 12,001 pounds or more, or if it's a moving van used for transporting personal household goods.
State Transient Room Tax
For LLCs in Utah's hospitality sector, the State Transient Room Tax, set at 0.32%, applies to rentals of accommodations like tourist homes, hotels, motels, and trailer courts for stays less than 30 consecutive days. This tax is in addition to the standard state sales tax and any local transient room taxes.
The combined effect of the State Transient Room Tax, sales tax, and local taxes can significantly increase the total tax rate applied to short-term accommodation rentals.
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 are some of the main types your LLC may be required to pay for federal tax purposes:
By default, the Internal Revenue Service (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 tax returns for federal income tax purposes 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.
In addition to having to pay federal income tax, members of single- and multi-member LLCs will need to pay federal self-employment taxes 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.
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.
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 Utah
Below, we’ve outlined the general process an LLC in Utah 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 Federal Tax Identification Number or 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: To pay taxes at the state level, use the Taxpayer Access Point (TAP). This is the Utah State Tax Commission's official and free online system for filing and payment.
- Local Tax Returns: Local tax filing procedures differ significantly between municipalities, so make sure to contact your local tax authority for specific guidance and 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 Utah 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.
Utah LLC Annual Report
The Utah Division of Corporations & Commercial Code requires all LLCs to file the Annual Report/Renewal Form to maintain their good standing and legal protections within the state. The form updates your LLC’s basic information – most of which should be found in your Utah LLC operating agreement.
For domestic and foreign LLCs, the renewal fee is set at $18, with a late fee of $10 being levied if the renewal is not filed by the due date, which is the anniversary date of the entity's formation.
Licensure and Tax Requirements
In Utah, 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 Licenses: If your LLC engages in selling or leasing goods or services, you will need to secure a sales tax permit from the Utah State Tax Commission through the Utah Taxpayer Access Point website.
- Professional Licenses: If your LLC in Utah is involved in specialized sectors such as healthcare, law, or engineering, you may need to obtain the appropriate professional licenses from relevant state authorities. For example, LLCs providing healthcare services are required to be licensed by the State Medical Board.
- Environmental Permits: LLCs operating in sectors that impact the environment, such as construction or waste disposal, must secure relevant permits from the Utah Department of Environmental Quality. These permits are crucial for ensuring compliance with environmental laws and regulations.
Note: For more information on state licensing visit Utah's Business Licensing & Registration Guide.
Utah LLC Taxes FAQs
Yes, Utah is considered a favorable state for forming an LLC due to its straightforward filing process, relatively low fees, and business-friendly environment. The state's flat tax rate and various tax exemptions available for LLCs add to its appeal for business owners.
For more information, have a look at our Utah LLC article.
In Utah, businesses are subject to various state taxes, including sales and use taxes and property taxes on real estate and tangible assets. Industry-specific taxes, such as the Insurance Premium Tax, may also apply depending on the business type.
For more information, take a look at the Utah taxes section above.
Utah is generally considered tax-friendly for businesses, offering a single tax rate for corporations and individual income, as well as a range of tax credits and exemptions.
Interested in finding out more? Check out our LLC Taxes article.