Pennsylvania Franchise Tax Return: Everything You Need to Know
A Pennsylvania franchise tax return is a tax document, also called the Pennsylvania RCT-101 tax return, which was once filed annually by certain businesses registered in the state of Pennsylvania, but is no longer required. 3 min read
2. What Is a Company's Net Worth?
3. Annual Registration
4. State Business Tax
5. State and Federal Employer Taxes
6. Sale and Use Taxes
A Pennsylvania franchise tax return is a tax document, also called the Pennsylvania RCT-101 tax return, which was once filed annually by certain businesses registered in the state of Pennsylvania, but is no longer required.
What Is the PA Capital Stock Tax?
Any LLCs (limited liability companies), C corporations, or S corporations registered in the state of Pennsylvania are required to pay the Pennsylvania Capital Stock Tax, which is a type of property tax.
What used to be a seven-digit number has been replaced by a 10-digit number to be used on the RCT 101 tax returns in Pennsylvania since 2013.
The PA Capital Stock tax is calculated by the Capital Stock Value multiplied by the Capital Stock tax rate, but was completely phased out in 2016.
If a business operates or has property in the state of Pennsylvania, but it is located and registered in a different state, the business will be required to file an RCT-106 in addition to theRCT-101, also called the corporate tax report, so that they pay the appropriate foreign franchise tax.
What Is a Company's Net Worth?
The net worth of a corporation is the sum of the company's capital stock, retained earnings, and paid-in capital, minus the treasury stock. Net worth is calculated by December 31, or the end of the tax year, unless a fiscal year is used by the business. A company's net worth could be negative if they experienced losses.
LLCs are a bit simpler than corporations as their net worth is determined by subtracting the company's liabilities from its assets.
PA Annual Requirements for Businesses
All states have different requirements for the businesses registered in their territory. The specific reports and fees required differ from state to state. It is more expensive to conduct business in some states compared to others.
The following are common annual requirements for businesses registered in Pennsylvania:
- Annual registration
- Business taxes
- Employer taxes
- Sales taxes
The state of Pennsylvania doesn't actually have annual report filing requirements for regular LLCs. Foreign and professional LLCs (PLLCs) in the state are required to file a Certificate of Annual Registration each year.
If you are running a PLLC or foreign LLC in Pennsylvania, you'll need to file this annual registration by April 15 via mail or online and pay a $520 fee for each member of the LLC.
State Business Tax
Many business entity types formed today are treated as pass-through entities when it comes to taxes. This means that the income of the business is passed through to its owners and they are responsible for claiming that income on their personal yearly tax returns. LLCs, and other types of pass-through business entities, are not taxed as a company.
In 2017, Pennsylvania stopped requiring franchise tax, or capital stock tax, payments. LLCs in Pennsylvania are no longer required to file a yearly corporate tax report
LLC owners can choose to be treated differently regarding taxation in the eyes of the IRS. They can elect C-corp status by filing form 2553 with the IRS. This means that they will no longer be a pass-through entity, but will be subject to corporate taxes.
Corporate taxes in Pennsylvania are fairly common compared to the other states. Corporate taxes are usually 9.99 percent of the income that is reported on the corporate tax return and deemed taxable.
State and Federal Employer Taxes
Any businesses with employees are required to pay state employer taxes. Before any company can legally pay employer taxes, they'll need to get an EIN (Employer Identification Number) from the IRS. Employer taxes are owed to both the state and the IRS, or federal government.
First, employers will need to register their company with the Department of Revenue (DOR). This can be done online or via mail by filling out and sending in Form PA-100. Then the business will be required to withhold employee taxes on a regular basis. LLCs will also need to file a REV-1667 form every year.
Businesses also need to make sure they register for state unemployment insurance taxes to be paid through the Department of Labor and Industry of Pennsylvania.
Sale and Use Taxes
Any businesses that sell products to customers must charge sales tax and pay that tax to the state. This can be done by registering the business with the PA DOR and obtaining a PA Sales Tax License.
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