When you register a company in the USA, you get lots of beneficial opportunities to grow your business. However, there are various kinds of taxes which are applicable to LLC registered in the USA. Here, we will understand everything about US Tax on LLC Owned by Non-Resident in simple language.
Type of Taxes for US LLCs Owned by Non-Residents
Federal Corporate Tax
The income of businesses operating within the country is charged with federal tax by the United States Internal Revenue Service (IRS). The federal tax obligations for LLCs owned by non-residents depend on the source and nature of the revenue. Federal corporate tax rates are flat 21% on business profit. If an LLC is classified as a disregarded entity then, business income will be taxed on the owner’s individual tax return under Form 1040NR. However it will not be taxed at flat 21% but for pass through taxation the tax rates start from 10% and go upto 37% on taxable income.
“Still you can save federal tax on USA LLC Business income. It is possible if your LLC status in non- ETBUS. What is ETBUS?
US State Corporate Tax
LLC’s state taxes differ depending on which state it gets registered in and operates. These may include income tax among others each with exclusive rates as well as gross receipt tax. For instance, Nevada, Ohio, South Dakota and Wyoming do not levy any state income taxes thereby being a good opportunity for non-resident owners of an LLC. List of all US State Corporate Taxes given below:-
| State | Corporate State Income Tax Rate (%) |
| Alabama | 6.5 |
| Alaska | 9.4 |
| Arizona | 4.9 |
| Arkansas | 6.5 |
| California | 8.84 |
| Colorado | 4.63 |
| Connecticut | 7.5 |
| Delaware | 8.7 |
| Florida | 5.5 |
| Georgia | 5.75 |
| Hawaii | 4.4 |
| Idaho | 6.925 |
| Illinois | 9.5 |
| Indiana | 4.9 |
| Iowa | 5.5 |
| Kansas | 4 |
| Kentucky | 5 |
| Louisiana | 8 |
| Maine | 8.93 |
| Maryland | 8.25 |
| Massachusetts | 8 |
| Michigan | 6 |
| Minnesota | 9.8 |
| Mississippi | 5 |
| Missouri | 4 |
| Montana | 6.75 |
| Nebraska | 7.81 |
| Nevada | 0 |
| New Hampshire | 7.7 |
| New Jersey | 11.5 |
| New Mexico | 5.9 |
| New York | 6.5 |
| North Carolina | 2.5 |
| North Dakota | 4.31 |
| Ohio | 0 |
| Oklahoma | 6 |
| Oregon | 6.6 |
| Pennsylvania | 9.99 |
| Rhode Island | 7 |
| South Carolina | 5 |
| South Dakota | 0 |
| Tennessee | 6.5 |
| Texas | 0.75 (Gross receipts tax) |
| Utah | 4.85 |
| Vermont | 8.5 |
| Virginia | 6 |
| Washington | 0.484 (Gross receipts tax) |
| West Virginia | 6.5 |
| Wisconsin | 7.9 |
| Wyoming | 0 |
Value Added Tax (VAT)
In the United States, sales taxes for limited liability company in USA are chargeable on sale of goods and services at different tax rates at local or state levels. Sales taxes vary significantly from one jurisdiction to another due to differences in sales tax rate laws. Sale tax rates listed below state wise-.
| State | State Sales Tax Rate (%) | Max Local Sales Tax Rate (%) | Combined Sales Tax Rate (%) |
| Alabama | 4 | 7.5 | 11.5 |
| Alaska | 0 | 7.5 | 7.5 |
| Arizona | 5.6 | 5.3 | 10.9 |
| Arkansas | 6.5 | 5.13 | 11.63 |
| California | 7.25 | 2.5 | 10.25 |
| Colorado | 2.9 | 8.3 | 11.2 |
| Connecticut | 6.35 | 0 | 6.35 |
| Delaware | 0 | 0 | 0 |
| Florida | 6 | 2.5 | 8.5 |
| Georgia | 4 | 5 | 9 |
| Hawaii | 4 | 0.5 | 4.5 |
| Idaho | 6 | 3 | 9 |
| Illinois | 6.25 | 4.75 | 11 |
| Indiana | 7 | 0 | 7 |
| Iowa | 6 | 1 | 7 |
| Kansas | 6.5 | 4 | 10.5 |
| Kentucky | 6 | 0 | 6 |
| Louisiana | 4.45 | 7 | 11.45 |
| Maine | 5.5 | 0 | 5.5 |
| Maryland | 6 | 0 | 6 |
| Massachusetts | 6.25 | 0 | 6.25 |
| Michigan | 6 | 0 | 6 |
| Minnesota | 6.88 | 2 | 8.88 |
| Mississippi | 7 | 1 | 8 |
| Missouri | 4.23 | 5.45 | 9.68 |
| Montana | 0 | 0 | 0 |
| Nebraska | 5.5 | 2.5 | 8 |
| Nevada | 6.85 | 1.53 | 8.38 |
| New Hampshire | 0 | 0 | 0 |
| New Jersey | 6.63 | 3.31 | 9.94 |
| New Mexico | 5.13 | 4.31 | 9.44 |
| New York | 4 | 4.88 | 8.88 |
| North Carolina | 4.75 | 2.75 | 7.5 |
| North Dakota | 5 | 3.5 | 8.5 |
| Ohio | 5.75 | 2.25 | 8 |
| Oklahoma | 4.5 | 7 | 11.5 |
| Oregon | 0 | 0 | 0 |
| Pennsylvania | 6 | 2 | 8 |
| Rhode Island | 7 | 0 | 7 |
| South Carolina | 6 | 3 | 9 |
| South Dakota | 4.5 | 4.5 | 9 |
| Tennessee | 7 | 2.75 | 9.75 |
| Texas | 6.25 | 2 | 8.25 |
| Utah | 6.1 | 2.85 | 8.95 |
| Vermont | 6 | 1 | 7 |
| Virginia | 4.3 | 2.7 | 7 |
| Washington | 6.5 | 4 | 10.5 |
| West Virginia | 6 | 1 | 7 |
| Wisconsin | 5 | 1.75 | 6.75 |
| Wyoming | 4 | 2 | 6 |
| District of Columbia | 6 | 0 | 6 |
“No VAT on sale of goods and services if you operate from Alaska, Delaware, Montana, New Hampshire and Oregon.
Furthermore, major states do not levy VAT on sale of intangible services such as Wyoming and Texas.
Franchise Tax
Some states levy franchise tax on LLC for being chartered or doing business there. Such a levy normally depends mainly on net worth or capital possessed by an individual concerned organisation. Franchise taxes like those levied in California and Delaware further increase the financial responsibilities of an LLC. State wise Details of Franchise Tax listed below-
Alabama:
- Rate: $0.25 per $1,000 of net worth (minimum $100)
- Additional Information: Business Privilege Tax based on the entity’s net worth.
Arkansas:
- Rate: $150 for LLCs; Corporations pay based on their stock value ($0.30 per $1,000 of authorized capital stock).
- Minimum Tax: $150
California:
- Rate: $800 minimum annual tax
- Additional Information: C corporations pay 8.84% of net income; S corporations pay 1.5% of net income.
Delaware:
- Rate:
- Authorized Shares Method: $175 for up to 5,000 shares; additional $85 per 10,000 shares.
- Assumed Par Value Capital Method: Varies, with a minimum of $400.
- Minimum Tax: $400
Georgia:
- Rate: $0.10 per $1,000 of net worth
- Minimum Tax: $100
- Maximum Tax: $5,000
Illinois:
- Rate: $1.50 per $1,000 of paid-in capital
- Minimum Tax: $25
Louisiana:
- Rate: $1.50 per $1,000 on first $300,000 of capital; $3.00 per $1,000 above $300,000
Mississippi:
- Rate: $2.50 per $1,000 of capital employed in the state
Missouri:
- Rate: $0.033% of the corporation’s assets apportioned to Missouri
- Minimum Tax: $200
New York:
- Rate:
- For most corporations: 0.1875% of capital
- Fixed dollar minimum tax ranges from $25 to $200,000, depending on New York receipts.
North Carolina:
- Rate: $1.50 per $1,000 of the largest of:
- Net worth apportioned to North Carolina
- 55% of appraised value of property in North Carolina
- Book value of real and tangible personal property in North Carolina
Oklahoma:
- Rate: $1.25 per $1,000 of capital
Tennessee:
- Rate: $0.25 per $100 of the greater of net worth or real and tangible property in Tennessee
- Minimum Tax: $100
Texas:
- Rate:
- Generally 0.75% of gross revenue for most entities
- 0.375% for entities primarily engaged in retail or wholesale trade
- Minimum Tax: No franchise tax due for entities with total revenue of less than $1,230,000.
West Virginia:
- Rate: 0.1% of the capital
“Minimum Taxes: Many states have a minimum franchise tax amount that applies regardless of the entity’s calculated tax liability.
Calculation Methods: The tax base can vary, with some states using net worth, capital stock, or gross revenue as the basis for the tax.
Filing Requirements: Franchise taxes are typically due annually and must be filed with the appropriate state agency.
Gross Receipts Tax (GRT)
Certain states levy a gross receipts tax as an alternative of sales tax, which is based on the total gross revenues of the LLC, regardless of profitability. This tax is independent of the income tax and can impact businesses with high sales volumes but low margins.
Here is a list of U.S. states that impose a gross receipts tax, along with the rates and additional details where applicable:
- Delaware: GRT Rates vary by business activity, generally ranging from 0.1006% to 0.7543%.
- Nevada: Commerce tax on businesses with gross revenue over $4 million, with rates varying by industry from 0.051% to 0.331%.
- Ohio: Commercial Activity Tax (CAT) at 0.26% on gross receipts over $1 million.
- Oregon: Corporate Activity Tax (CAT) at $250 plus 0.57% of gross receipts over $1 million.
- Texas: Franchise tax, also known as the margin tax, at 0.75% for most businesses and 0.375% for wholesalers and retailers on taxable margin (total revenue minus certain deductions).
- Washington: Business and Occupation (B&O) tax, with rates varying by classification of business activity. Common rates include:
- Retailing: 0.471%
- Wholesaling: 0.484%
- Manufacturing: 0.484%
- Service and Other Activities: 1.5%
- Nevada: Commerce tax rates vary by industry, generally from 0.051% to 0.331% of gross revenue over $4 million.
“Applicability: Gross receipts taxes are typically applicable to businesses operating within the state and generating revenue from sales of goods and services.
No Deductions: Unlike income taxes, gross receipts taxes do not allow deductions for business expenses, which can result in a higher effective tax rate on businesses with lower profit margins.
Industry-Specific Rates: Some states have different rates for different industries, recognizing the varying profit margins across sectors.
How to make Zero Federal Tax on USA LLC profit by Non-resident
If you want to figure out which US state is ideal to incorporate a US LLC Company from a tax and business friendly perspective, you can call our experts at 8881-069-069 to consult for free.
Download E-Startup Mobile App and Never miss the latest updates narrating to your business.