Small businesses that conduct business in Utah may run into a variety of tax obligations on top of their federal taxes, including state corporate franchise and corporate income taxes, sales taxes and use taxes, and business property taxes. Read on to learn about the different tax obligations the state imposes.
Which businesses must file the corporation franchise and income tax return in Utah?
C corporations that are qualified foreign corporations registered with the Department of Commerce to “transact business” in the state. Transacting business in Utah does not include isolated transactions or transacting business in interstate commerce, among other activities.
C corporations that aren’t qualified to do business in Utah may still need to file Form TC-20, though, under the income tax provisions. These corporations must file if they:
- Derive income from Utah sources,
- Have no regular and established place of business in Utah (owned or rented), and
- Don’t maintain an inventory or have employees located in Utah.
For example, suppose a trucking company owned by a foreign corporation not qualified to do business in the state operates in or through Utah. In that case, the company is subject to the income tax, not the franchise tax.
What is Utah’s corporate tax rate?
Utah imposes a flat rate of 4.65 percent on net taxable income. In addition, every corporation that files a corporate tax return must pay a minimum “privilege” tax of $100, regardless of whether they do business in Utah.
Are any tax credits available in Utah?
Yes, Utah has a variety of nonrefundable and refundable tax credits.
Nonrefundable credits include the following:
- Historic Preservation Credit
- Low-Income Housing Credit
- Credit for Increasing Research Activities in Utah
Refundable credits include:
- Renewable Commercial Energy Systems Credit
- Pass-Through Entity Withholding Tax Credit
- Mineral Production Withholding Tax Credit
How do I file my corporate tax return in Utah?
The return can be filed electronically through a joint program between the Utah State Tax Commission and the IRS. You submit the federal and state information at the same time, and the IRS forwards the state data to the Tax Commission after pulling the federal data.
Form TC-20 must be filed on or before the 15th day of the fourth month following the close of the tax year or the due date of the federal return — whichever is later.
Are extensions available?
In Utah, corporations are automatically allowed an extension of up to six months without needing to file an extension form. Note that this extends only the filing date, not your obligation to pay your taxes.
Does Utah require estimated payments of the franchise and income tax?
Quarterly estimated payments are required if a corporation has a Utah tax liability of $3,000 or more in the current or previous taxable year. The payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the corporation’s taxable year.
You can make the payments equal:
- 100 percent of the previous year’s tax in four equal payments, or
- 90 percent of the current year’s tax based on the following percentages:
- 1st quarter: 22.5 percent
- 2nd quarter: 45.0 percent
- 3rd quarter: 67.5 percent
- 4th quarter: 90.0 percent
Do new businesses need to pay estimated taxes?
A new business isn’t required to make quarterly payments in the first year it files in Utah as long as it pays the minimum tax on or before the due date without the extension.
What about S corporations in Utah?
S corporations don’t pay franchise and income taxes. Instead, their members pay individual income tax on their proportionate share of the income. But they use Form TC-20S to pay use tax (if they don’t have a Utah sales tax license/account) and pass-through withholding (see below).
The return is due on or before the 15th day of the month after the close of their taxable year or the due date for the federal return, whichever is later. Like C corporations, S corporations receive an automatic extension of up to six months to file their returns.
Do partnerships and LLCs pay Utah’s corporate franchise and income tax?
No. Like S corporations, partnerships and limited liability companies (LLCs) are a type of pass-through entity, meaning the partners or members pay individual taxes on their share of the income. They do, however, need to file Form T-65, “Utah Partnership/Limited Liability Partnership/Limited Liability Company Return,” to pay use tax (if they don’t have a Utah sales tax license/account) and pass-through withholding (see below).
Does Utah have a pass-through entity election?
Yes, a pass-through entity can elect to pay Utah income tax on voluntary taxable income on behalf of its partners or members. This mitigates the IRS’s $10,000 limit on the itemized deduction for state and local taxes (SALT) on federal individual income tax returns. The election can generally be made by general partnerships, LLCs, limited liability partnerships or limited partnerships, and S corps.
The election is made by electronically filing Form TC-75, “State and Local Tax (SALT) Report,” and submitting an electronic SALT tax payment on or before the last day of the business’s taxable year. The SALT tax and the SALT Report must be filed electronically through Taxpayer Access Point (TAP). The tax is calculated by multiplying the total amount of taxable income for all of the owners by the individual income tax rate for the taxable year. The owners then claim a nonrefundable tax credit against their Utah individual income tax liability, equal to the amount of the entity-paid tax attributed to the owner.
This election is scheduled to expire at the end of 2025. That’s also when the federal SALT cap is set to expire absent Congressional action.
Does Utah have sales and use taxes?
Yes, it has both. The sales tax applies to the purchase price or sales price charged for retail sales and leases of:
- Tangible personal property (items that can be seen, weighed, measured, felt, touched, or are in any way perceptible to the senses)
- Products transferred electronically (for example, music, movie, and reading materials)
- Certain services purchased for storage, use, or consumption in Utah.
The seller must collect sales tax from the buyer and pay it to the Tax Commission.
The use tax applies when sales tax is due on a purchase, but the seller doesn’t collect it. If you purchase an item for use in Utah from an out-of-state retailer or online, and the retailer or internet seller doesn’t collect the sales tax, you must pay use tax on the item directly to the Tax Commission.
Sales and use taxes are called trust fund taxes because the seller holds the tax in trust for Utah until paid to the Tax Commission.
Which remote sellers must pay sales and use taxes in Utah?
Retailers and marketplace facilitators may need to collect and pay the taxes if, in the previous or current calendar year, their Utah sales resulted in:
- Gross revenue exceeding $100,000, or
- 200 or more separate transactions.
What is the sales tax rate in Utah?
The sales tax rate depends on where you’re doing business in Utah and the type of business you are conducting, but it generally starts at 4.85 percent. Companies shipping goods into Utah can look up their customer’s tax rate by address or zip code on the Utah Taxpayer Access Point (TAP). Tax rates are also available online at Utah Sales & Use Tax Rates.
Monthly sales tax filers (see below for more information on filing status) may take a seller discount equal to 1.31 percent of the combined sales tax.
Does Utah have any sales tax exemptions?
Utah provides three types of sales tax exemptions, based on:
1. Entity (who buys or sells the product),
2. Use (how the buyer uses the product), or
3. Product (the type of product).
Exemption certificates are required for entity- or used-based exemptions.
How do I pay sales and use taxes in Utah?
If you have or are required to have a Utah Sales and Use Tax License, you must report and pay the use tax on your “Utah Sales and Use Tax Return” (Form TC-62S, for a single place of business in Utah, or Form TC-62M, for all other sellers). You can file the return on TAP.
You’ll first need to obtain a Sales and Use Tax Account. You can do that through TAP or Utah’s OneStop Business Registration. Alternatively, you can file a paper form TC-69, “Utah State Business and Tax Registration.”
If you aren’t required to have a sales and use tax license, you report and pay your use tax on your Utah business income tax return (generally, TC-65 for partnerships and LLCs, TC-20 for corporations, or TC-20S for S corporations).
What are Utah’s tax filing deadlines?
The returns are due according to the following schedule:
|Annual Tax Liability||Filing Status||Due|
|$1,000 or less||Annual filer||January 31|
|$1,001 to $50,000||Quarterly filer||April 30, July 31, October 31, January 31|
|$50,001 to $96,000||Monthly filer||Last day of month following end of period.|
|$96,001 or more||Monthly filer with mandatory EFT payments||Last day of month following end of period.|
What if I’m a new business?
New businesses estimate the amount of their sales and use tax liability when they apply for a license and are assigned a filing status based on the estimate. The Tax Commission reviews accounts annually and will let you know in writing if your status changes.
Do I need to file for a period in which I haven’t collected any sales tax?
Yes, the obligation applies regardless of whether you’ve collected sales tax that period.
How long should I keep my records?
You must keep records for three years from the date you file a return.
Do Utah businesses have withholding obligations?
- 1st quarter: April 30
- 2nd quarter: July 31
- 3rd quarter: October 31
- 4th quarter: January 31
The annual return is combined with the fourth quarter return.
If you have no withholding for a period, file a return that shows zeros.
Are there any exemptions from withholding obligations?
You may be exempt if you do business in the state for 60 days or less in a calendar year and have Tax Commission approval.
Does Utah have any other withholding obligations I should know about?
Pass-through entities (partnerships, LLCs, and S corporations) also must withhold Utah income tax on income from Utah sources for:
- Nonresident individual partners, members, and shareholders
- Nonresident non-individual partners, members, and shareholders
Does Utah have an unemployment tax?
Yes. The Utah employer contribution rate is calculated annually by the Unemployment Insurance Division. In 2023, more than 68 percent of Utah’s employers qualified for the minimum contribution rate of 0.003 percent on a taxable wage base of $44,800—or about $134 per employee.
Are there any excise taxes in Utah?
Utah imposes excise taxes on beer, fuel, and tobacco.
Do businesses pay taxes on personal property in Utah?
Yes, the state has a business personal property tax. Personal property includes furniture, fixtures, machinery, and equipment. Taxes are paid on property acquired in the prior year, so property acquired in 2023 is taxed in 2024. Taxes are due on May 15.
Do any exemptions apply?
Yes. Tangible personal property with a total aggregate fair market value of $27,000 (for 2023) or less within a single county is exempt from the tax. The following are also exempt:
- Items that cost less than $500 and aren’t critical to the business
- Certain agricultural property
- Household furnishing
How is personal property valued?
The State Tax Commission has developed valuation schedules.
For most property, the value is based on the acquisition or original cost multiplied by a “percent good” factor. The factor is established from IRS economic life estimates (note that economic life isn’t the same as a depreciation period for federal income tax purposes).